EU Companies Race for Deals in Post-Sanction Iran (3/9)     Print Email

By Ben Antenore, European Affairs

As international sanctions are lifted in the wake of the nuclear deal, European companies are rushing to have first access to the lucrative, almost 80-million-person strong Iranian economy. Because of U.S. imposed sanctions unrelated to the nuclear deal, dating back to 1979, U.S. companies are mostly on the sidelines.

On Sunday, March 6, for the first time since mid-2012, crude oil from Iran was offloaded into a European port – near the Spanish port of Algeciras. The arrival of the Monte Toledo, carrying one million barrels of Iranian crude, marked the termination of oil sanctions first imposed by Brussels in 2012, to try to force Iran into negotiations to end its nuclear program.

Spain is not the only country that will be receiving Iranian crude oil. Of the 29 tankers loaded with crude oil from Iran in February, excluding the Monte Toledo, three others are bound for Europe. One is heading to Constanta, an oil port in Romania, another to France, and the final vessel is likely bound for a Mediterranean port as it sits in the Suez Canal waiting for a destination. Tehran is hoping to reach production of 500,000 barrels a day for export to Europe, a 100,000 increase over production even before the embargo.

Iran’s restored oil market with Europe is only a piece of a series of deals made between EU countries and Iran since the abolition of sanctions.

German truckmaker Daimler AG rushed to rejoin the Iranian market, signing preliminary agreements in January, with Iran Khodro Co., the largest automaker in the country. Daimler believes that it could sell as many as 40,000 trucks a year, far more than before sanctions.

French airplane manufacturer Airbus has also made a $25 billion agreement with Iran for the purchase of 118 brand new aircrafts. The first units will arrive this year and the last in 2022. It’s a vital deal for Iran Air, seeking to rebrand itself as a leader in Middle Eastern commercial aviation.

In Italy, the first country Iranian President Hassan Rouhani visited on an economic and diplomatic mission following the lifting of sanctions, there were more than $22 billion worth of deals signed in only 2 days. Saipem, a subsidiary of Italian oil and gas giant Eni, signed a Memorandum of Understanding with the Persian Oil & Gas Company. Steel firm Danieli also signed an agreement worth $6 billion to supply heavy machinery. Some other Italian private sector companies involved are shipmaker Fincantieri SpA and power engineering company Ansaldo Energia SpA. Independent of these deals, car manufacturer Fiat-Chrysler is also looking to rejoin the Iranian automotive market.

In addition to the Airbus deal, there are a series of business agreements with French corporations. Carmaker Peugot-Citroen has a $430 million deal with Iran Khodro Co. to produce 200,000 cars a year there, starting in 2017. The energy company Total has also signed to import crude oil. Finally, the state-owned railway company SNCF has an agreement with its Iranian counterpart. At the conclusion of Rouhani’s visit to France (where these deals were signed), French Prime Minister Manuel Valls made it clear that “France is available for Iran.”

Although EU sanctions on Iran have been removed and the United States will stop sanctioning foreign individuals or firms for buying oil and gas from Iran, American trade sanctions on the Islamic Republic are still in place, some having been active since 1979. Business for American businessmen is far more difficult in this new market than for their European counterparts.

Despite this, Iran has invited the world’s largest aircraft manufacturer Boeing for talks in Iran to negotiate possible airplane purchases. Fortunately for Boeing, U.S. officials have given the o.k. for the company to start commercial talks with Tehran. Boeing has been playing a strategic game in trying to get access to Iranian markets, keeping a low-profile. If the negotiations are successful then it will be the first time in 30 years that Iran entered into an official business agreement with a U.S. company.

There are many who believe that the U.S. is losing out on an extraordinary economic opportunity and that its eventual entry into the Iranian economy may be too late for the kind of lucrative business deals that European companies currently are landing. However, Ardavan Amir-Aslani, an Iranian-French lawyer in Paris, believes that many Iranian executives are waiting to make deals with American companies: “Millions of Iranians go back and forth to the U.S., it’s the place Iranians most identify with. There is a craving for American consumer goods, anything American. They all dream of America.” At the moment, the only thing most American businessmen can do is watch as trade relation between Europe and Iran unthaw.