Monday, 13 January, 2020

Italy hopes to utilise historic Iran ties with trade mission

Italy is poised to send a large trade delegation to Iran at a time when heightened anti-US rhetoric in the Islamic Republic is raising doubts about post-sanctions opportunities for US businesses — potentially opening doors in the $400bn economy for Tehran’s historic European partners, FT reported.

Some 300 delegates from five sectors — medical, green energy, automobiles, construction and manufacturing equipment — are scheduled to arrive in Tehran on Saturday for a three-day visit to meet senior officials and business figures, Riccardo Monti, president of the Italian Trade Commission, said.

Representatives from Danieli, the steel group, energy company Enel, agricultural machinery maker CNH Industrial, Telecom Italia and several banks would be among the delegates, Mr Monti said.

Tehran has hosted a number of European trade delegations since July, when it signed a landmark nuclear deal with major world powers — the US, UK, France, Russia, China and Germany. The agreement is expected to lead to the lifting of crippling economic sanctions, imposed over Tehran’s atomic ambitions, in the first half of next year.

However, the environment for US companies seems likely to remain chilly for some time to come.

Some older US sanctions will remain once the nuclear-related curbs are lifted, creating uncertainty among US companies and those with US interests over potential action if they do business with the Islamic Republic.

Meanwhile, Iranian hardliners opposed to any rapprochement with the US are fanning fears that Washington will seek cultural and political influence in the wake of the nuclear deal. A fast-food restaurant advertised as a KFC outlet and seen as symbolising US culture was shut down earlier this month, and Ayatollah Ali Khamenei, Iran’s supreme leader, warned of “unbridled imports, especially imports of any American consumer goods after the lifting of sanctions”.

A number of Americans of Iranian descent remain in detention, including Siamak Namazi, an Iranian-American businessman, who was jailed in October on unknown charge, and Jason Rezaian, the Washington Post correspondent in Tehran who has been in custody since 2014.

The unsettling atmosphere has led US-linked businesses to adopt a watch-and-wait attitude. “I immediately slowed down my business [after Mr Nazami’s arrest and the restaurant shutdown], said an Iranian-American private equity specialist. “I think I have to wait for at least a few more years to do real business here.”

The likely absence of US companies opens the way for European rivals to step into the gap. But western businesspeople warn that hostility to the US could hamper many leading businesses seeking to expand into Iran. “Closing doors to Americans only has short-term benefits for Europeans,” said one.

Many companies in the Italian trade delegation had no US interests and were free to do business with Iran once nuclear sanctions were lifted, said Mr Monti. But half had US exposure and so were “more careful and are on a purely exploratory mission”.

Nonetheless, Italian exports to Iran, which totalled €1.2bn in 2014, could rise to €2bn as soon as next year, he said.

Iran’s untapped market of 78m people represents a big opportunity for Italy at a time when it is struggling to boost exports. But some Iranian businesspeople complain that many European countries, hit hard by the credit crunch in the global financial crisis, see Iran as an export destination rather than a market for investment — desperately needed in a sanctions-crippled economy where youth unemployment remains at 25 per cent.

The big European banks are not expected to offer financing to potential investors even when sanctions are officially lifted, until they are certain the US is fully on board.

“Finance is a problem,” acknowledged one European businessman. “But we can secure funds in other ways, such as joint ventures with the Iranian expatriate community, which has a lot of money. Iran also needs to resort to the world’s debt market.”

For now, Iran hopes small European banks such as those in Germany and Italy will compensate for the absence of the leading lenders.

And despite the business community’s wariness, Iran’s economy — the region’s second-largest after Saudi Arabia — is a tempting prospect for Italy, one of Iran’s biggest trading partners in the years before the sanctions regime. “Now,” said Mr Monti, “we need to recover some of the lost time.”

Image: Mohammad Javad Zarif (r), Iranian foreign minister, met Italian counterpart Paolo Gentiloni in Tehran this summer. Italy hopes to capitalise on historic ties between Rome and Tehran during its forthcoming trade mission

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