Following the recent nuclear agreement, a significant number of EU and US-based companies have started reassessing their strategy towards Iran. There is a growing consensus among their senior executives that any market share gain or profitable growth in the short to medium-term would only materialize from effective strategic planning that must take place right now. In prioritizing ready-to-execute Iran plans, foreign companies are advised to:
- Remain mindful of sanctions
Companies worldwide with significant assets and operations in the United States and that are contemplating doing business with or reentering Iran will want to draw upon broad sources of expertise as they consider their strategy in this new environment. Engaging legal counsel will, of course, be essential. But knowledge of the legal situation and regulatory environment alone will not be sufficient. The future of U.S.-Iran political and economic relations will be determined through a complex process involving interplay among the U.S. Administration; Congress; America’s many private political and policy organizations and politics of the November 2016 American elections. Sanctions policies and regulations of the European Union and other countries will need to be considered and evaluated. Accurate information and interpretation of developments in these areas will be critical to avoid reputational harm, forecast risk and seize early-mover opportunities when legally permissible.
Understand the Iranian Mindset
Iran has the ambition of becoming the economical and technological powerhouse of the region. Although the imposition of sanctions has had a significant negative impact on reaching this objective, the ambitions remain in place. It should be noted that key economic indicators such as inflation and unemployment have been improving in spite of sanctions and although economic size and growth are below benchmark peers such as the UAE, given the economic diversity and abundance of natural resources of the country, Iran is poised for significant growth in the post-sanction area, helping it move closer to realizing its vision.
Iran also aims to develop a knowledge-based economy and as such is looking for the two important elements of skill and technology transfer in its partnership with foreign entities. According to the latest estimates, Iran is in need of $2,000 bn of industrial investment over the next 10 years. It should also be added that the country is moving away from an import-based mentality to one based on the development of its manufacturing base and export potential. As such entities that opt for the establishment of either independent or joint production units will be preferred over those seeing Iran as just an export destination.
