It’s been a busy month for Iran with a number of inroads being made into one of the world’s largest untapped markets. The US has stated legitimate business with Iran is available, the major powers responsible for lifting sanctions against the country met in New York, Airbus and Boeing received licenses to commence aircraft sales to Iran and Australia led a trade delegation to Tehran and reopened its Austrade office in the capital. This appetite for engagement has been evident ever since nuclear-related economic sanctions relief was afforded to Iran.
In July 2015, the United Nations Security Council’s (UNSC) five permanent members (China, France, Russia, the UK and the US), along with Germany and the High Representative of the European Union for Foreign Affairs and Security Policy, concluded a historic Joint Comprehensive Plan of Action (JCPOA) with Iran. The effect of JCPOA limited Iran’s sensitive nuclear activities in exchange for the easing of economic sanctions which have been in place against the country for a number of decades.
This year, sanctions against Iran have been relieved globally across numerous sectors, including financial and banking industries, oil, gas and petrochemical industries, shipping and transport sectors, gold and other precious metals, and banknotes and coinage. There are still restrictions on arms and related materials, certain metals, software and nuclear-related equipment, and specified persons and entities.
Despite remaining restrictions, countries the world over are beginning to seek out opportunities for economic engagement with Iran. An EU delegation has visited Iran to explore a broad variety of sectors for cooperation, including economic relations, science and civil nuclear cooperation, energy and the environment. The UK has appointed an Ambassador to Iran, and has also begun expanding economic relations and bilateral cooperation in sectors such as infrastructure and renewable energy - developing MOUs in relation to rail transportation and solar power.
Such diplomatic actions have already resulted in tangible outcomes and deals. In a much anticipated-move, the US Treasury has granted licenses to Boeing and Airbus to deliver planes to Tehran. The transactions are sizeable, with Boeing’s license covering the sale of 80 planes to Iran’s national carrier, Iran Air, and Airbus’ license covering an initial sale of 17 planes, as part of a larger deal involving over 100 planes. British Airways has resumed direct flights between London and Tehran, and Air France has resumed flights between Paris and Tehran. French phone carrier Orange is negotiating expansion into the Iranian mobile and data markets, and Germany has concluded a number of trade deals with Iran, including contracting Siemens to upgrade Iran’s railway network and Mitsubishi Germany to modernise a gas-fired plant.
Notably, in relation to these latter deals, Germany and Iran’s central banks have agreed to cooperation and Germany has also promised to remind the US of its commitment to the reduced sanctions against Iran. These are important statements in an atmosphere where international banks and financial institutions are still exercising immense restraint in relation to trade deals with Iran, primarily due to the fact that restrictions on Iranian-related transactions being processed through the US financial system remain in place. In response to mounting international pressure, US Treasury Guidance updated last week has clarified that non-US banks can undertake dealings in US dollars with Iran. Despite this there are a number of transactions that are still sanctionable, and the prohibitions on routing transactions through the US financial system still present practical difficulties in engaging with Iran. The normalisation of banking relations with Iran will be critical in increasing trade opportunities.
These diplomatic strategies, financial-sector commentary and trade deals indicate the global stage is set for economic engagement with Iran.
Similar movements are mirrored for Australia domestically. Australia has the potential for a strong relationship with Iran, having maintained a diplomatic presence there since 1968. The Australian Embassy in Tehran has remained open throughout years of political tension, Australia has an Ambassador to Iran and Australia’s Austrade office recently reopened, in order to assist companies to navigate the complex Iranian market and capitalise on economic opportunities.
Recently, Australia’s Minister for Trade, Tourism and Investment led a delegation of Australian companies (including Qantas, Woodside, Cochlear, GrainCorp, LiveCorp, WorleyParsons, Meat & Livestock Australia, Rubicon Water and Blackmores) to Iran. The delegation aimed to unlock opportunities in the health, water management, agribusiness and food, mining, education and training sectors. Blackmores, a provider of vitamins and supplements, signed an agreement granting distribution rights to an Iranian company for Blackmores products in Iran.
Australia concluded three MOUs with Iran. The first, on trade and investment, establishes a framework for economic relationships in priority areas including agribusiness, resources, health and water resource management. The second relates to cooperation on export finance, with the aim of helping businesses overcome the challenges associated from sanctions which still apply in the financial sector. The third relates to water management cooperation and the commercial opportunities associated with the efficient use of water resources. In this vein, Universities in Australia and Iran have reached agreement over the formation of an aqua research centre.
Iran has remained economically unexplored for decades. Trade, investment and negotiations are gaining traction, and DFAT has announced that companies looking to engage with Iran are able to have specific exports or deals assessed. While compliance with a still-complicated sanctions regime is required (there are still limitations depending on what you intend to sell and to which Iranian entity), Iran is looking like a land of opportunity.
Corrs has an active practice advising clients on transactions in Iran. Corrs partners Alan Churley and David Yates visited Iran in May 2016 and are due to visit again in the next couple of months. Corrs also collaborates with Iran and UAE lawyers, and have retained expert consultant Pouyan Afshar of Project Caspian, to provide end-to-end solutions.
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