The Iran Deal: One Year On

It has been a year since the Joint Comprehensive Plan of Action (JCPOA) was implemented and already the world looks very different to the one in which the deal was agreed. We look back at progress made, tribulations suffered and what businesses need to think about now in order to take advantage of future opportunities.

Undeniable progress has been made There have been some definitive positives for Iran in the last year. Key achievements include:

The IMF has forecast the Iranian economy will grow at an impressive rate of 6.6% Total became the first foreign oil major to sign a deal with Iran for a USD 2 billion South Pars 11 gas field development Oil cargoes exported from Iran rose to 563 in 2016, up from 66 in 2012 In February 2017 Iran's oil exports touched 3 million barrels per day for the first time since the 1979 revolution Iran has signed with Airbus and Boeing to purchase up to 180 passenger aircraft to support its ailing civil aviation sector The value of planned but un-awarded non-hydrocarbon projects in Iran is USD 65.7 billion On the political side, Iran's reformist president, Hassan Rouhani, who negotiated the JCPOA, has indicated that he will run in the Presidential election later this year.

Yet frustration remains at the lack of investment

The overriding feeling in Iran is one of frustration. Whilst a few foreign investors have looked to gain first mover advantage, the volume of foreign investors has simply not materialised in the numbers hoped for. Even Total is reported to have delayed the final decision on its investment until after summer 2017, whilst it waits to see whether US sanction waivers are renewed.

One cause of the relatively slow influx of investors has been reluctance within most tier one financial institutions to support any business with Iran. US financial institutions were, of course, still prohibited from facilitating business with Iran under the US primary sanctions that remained in force. But foreign financial institutions (FFIs) were, in theory, able to clear (non-US dollar) funds, lend money and support investment and business with Iran. The failure to do so, outside of a few small regional European and Asian banks,has been a persistent dampener on trade and investment. The Obama administration was well aware of this limitation. Secretary of State John Kerry was at pains last year to assure top European banks that they had nothing to fear from pursuing "legitimate business" with Iran. Prime Minister David...