International talks hold promise on trade for Iran
Interest in Iran as a destination for business is growing ahead of the latest international talks this month aimed at resolving a deadlock about Tehran’s nuclear programme.
If the discussions between the six world powers and Iran progress smoothly, there is potential for sanctions against the country being eased and commercial routes being revived.
“It’s not an alternative between Iran opening up and not opening up,” said Trita Parsi, the founder and president of the National Iranian American Council, a US-based non-profit organisation aimed at advancing the interests of Iranian-Americans. “It is a case of either moving towards resolving this issue or the situation between the US and Iran deteriorating. It is either going to move in a positive or negative direction.”
A comprehensive deal between Iran and the United States, Russia, China, the UK, Germany and France would help to unleash what some observers believe has the potential to become one of the world’s most promising emerging markets. Iran has a relatively untapped consumer market, with a population of 76 million, second only to Egypt in size in the Middle East and North Africa region. But years of tightening United Nations, EU and US sanctions have cut off foreign investment and helped to push up unemployment. The economy sagged by 3 per cent in the past financial year from 2013 to this year, estimates the World Bank.
A revival in Iran’s fortunes would also be likely to benefit the UAE, the historic gateway for goods heading into and out of Iran.
“Trade between the UAE and Iran doubled over the past five years despite a decline in its overall trade with the rest of the world because of the sanctions,” said Alia Moubayed, the director and head of research for Mena at Barclays. “As the latter get dismantled in the event of an agreement on the nuclear talks, we expect a rebound in trade which should constitute another boost to UAE growth.”
The UAE is the regional headquarters for the operations of numerous multinationals operating along the trade corridor between Mena, Africa and Asia. As companies begin to test the water in Iran, many are expected to use the UAE as a base from which to explore the market.
Renault, the French car maker with its Middle East headquarters in Dubai’s Jebel Ali Free Zone, said in January it had resumed shipments to Iran after a temporary easing of sanctions.
“If Iran opens up Dubai will have another big boost to its economy,” Ashok Aram, the chief executive of Mena Deutsche Bank, said at a conference in the city last month. “A lot of European, American, Chinese, Japanese companies are planning to invest using Dubai as a gateway to Africa. They’re all factoring in the possibility that another economy [Iran] will open up.”
In a measure of the interest in Iran from businesses in the region, more than 200 business representatives registered to attend a seminar in Dubai last week about the potential for future opportunities in Iran. The event was cancelled after an order by the Dubai Department of Tourism and Commerce Marketing (DTCM). Nobody was available from DTCM to explain why.
“There’s a lot of interest in the market for exploring information and learning what is allowed and what is not allowed under the sanctions and what the potential opportunities there might be if sanctions are eased,” said Christianna Tsiterou, the managing partner of Innoverto, the event organiser.
Still, the path ahead to a breakthrough with Iran is fraught with potential obstacles. Iran and the six world powers made slow progress in the previous round of talks last month in Vienna. Talks will resume there between June 16 and 20.
And even if the deadlock is broken ahead of a July 20 deadline, the UAE and the rest of the GCC could yet be hit by a ramp-up in Iranian oil exports.
“The return of Iranian oil to the market constitutes a key supply risk in the medium term, though we expect this return to be gradual,” said Ms Moubayed.
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Published: May 31, 2014 04:00 AM