[Podcast] The Tough Road Ahead for FDI in Iran

Since the nuclear framework agreement was reached on April 2, FSG has seen unprecedented interest from foreign multinationals seeking to position for success in the Iranian market. On Wednesday, May 6, I recorded a podcast with Iran expert Aniseh Bassiri Tabrizi to explore issues critical to foreign investment in Iran, including the status of nuclear negotiations and how the market could open if there is a final nuclear deal. Our discussion was wide-ranging and below is a summary of the podcast’s three main segments:

1. An update on the status of nuclear negotiations (1:22 – 10:06)

There are three main sticking points that negotiators must overcome to reach a final nuclear deal: a) ways to verify the terms of a deal; b) restrictions on Iran’s nuclear development-related research and development; and c) timing and scale of sanctions relief. It will be challenging to overcome these obstacles, but all negotiators are aware that domestic pressures in Tehran and Washington will only increase if a final deal is not reached by the June 30 deadline. Legislation granting US Congressional oversight of a potential deal likely undermines the way that Iranian negotiators look at the Obama administration’s authority, but it will not end ongoing talks. It is important for companies to have plans in place for the Iranian market. However, managing expectations is critical, as we haven’t reached the finish line yet. Many hurdles remain before a potential final nuclear deal can lead to sanctions relief.

2. Sanctions policy, in particular EU sanctions (10:07 – 18:49)

France, Germany, and the UK have been mostly united on sanctions policy. The European approach to nuclear negotiations will not have an impact on whether European-based companies are well-positioned in a potential post-sanctions landscape. French companies are poised to capitalize on Iran opportunities, especially in the automotive sector, after participating in the largest foreign business delegation last year even though their government has taken a harder line than European counterparts in negotiations. German companies will be best-positioned, because their government has maintained the best relations with Iran despite the tightening of sanctions policy in recent years. Importantly, Aniseh believes that EU-US coordination on sanctions policy would hold together even if US Congressional action causes negotiations to collapse or a final deal to unravel.

3. Economic and trade implications of a final nuclear deal (18:50 – 32:51)

If a final nuclear deal is reached, there could be a letdown for some of the Iranian public, which has been looking forward to major economic improvements since President Hassan Rouhani was elected president in June 2013. Still, a final nuclear deal would lead to an initial boost to business and consumer confidence in Iran (similar to what we saw with the framework agreement on April 2). And after so many years of living under sanctions, Iranians are likely to persevere despite the absence of immediate improvements to their daily lives. This provides a valuable lesson for foreign MNCs focused on Iran right now:  be prepared to seize opportunities provided by easing restrictions on trade and investment but remain patient, because nothing is going to change overnight.

Listen to the podcast for more insights on key considerations for companies preparing for post-sanctions Iran.

This is Part 2 of our Preparing for Post-Sanctions Iran series. You can read Part 1 here. For more insights like these, follow Matthew on Twitter @IMaSpiv or contact us to learn more. You can also follow FSG expert advisor Aniseh Bassiri Tabrizi on Twitter @AnisehBassiri

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