Iran holds 'significant potential' for foreign firms if nuclear deal struck, business leaders say

Country touted as great investment opportunity but there are challenges beyond sanctions

A jewellery shop in the Grand Bazaar in Tehran. With Iranians facing economic hardship, many hope a deal can reached with the US that paves the way to lifting sanctions. EPA

Iran would offer major opportunities for foreign firms if Washington and Tehran secured a deal on the country’s nuclear programme and wide-ranging sanctions were lifted, Iranian business representatives said, although non-sanctions-related barriers to business would remain and need tackling from within.

“Iran's market offers significant potential in industries such as energy – oil and gas exploration and production – petrochemicals, agriculture, health care and technology,” Hasan Forouzanfard, head of the Tehran Chamber of Commerce’s governing committee, have told The National. “The energy sector could attract foreign investment for modernising infrastructure and increasing production capacity.”

Iran’s $480 billion economy has been hampered for decades by sanctions imposed by the US, EU and UN on much of its industry, including the energy, banking, defence and technology sectors. The measures aim to curb expansion of Iran’s nuclear programme, target those involved in human rights abuse and, the EU says, serve as a response to Tehran’s support for the Russian invasion of Ukraine.

Iranian and US officials held a second round of talks in Rome on Saturday attempting to find enough common ground to seal a deal over the nuclear programme in exchange for sanctions relief.

Kazem Gharibabadi, Iranian Deputy Foreign Minister for Legal and International Affairs, told state media that the two sides had “reached a mutual understanding on the broad framework” of the negotiations. Technical discussions will continue on Wednesday in Muscat, Oman.

Although there are major hurdles to reaching an agreement, the prospect is more likely than it has been in years. In a shift of tone, Iranian President Masoud Pezeshkian said this month that the country’s supreme leader, the typically virulently anti-western Ayatollah Ali Khamenei, was not opposed to US businesspeople working in Iran.

“I meet the supreme leader several times each week, he has no objection to American investors in the country,” Mr Pezeshkian said.

For Iranian businesspeople, foreign investment and the ability to trade more easily would be welcome.

“During these past few decades in which the US put in place very strict sanctions, Iranians were basically cut off from American products,” Mahrad Ebad, a board member of the Tehran Chamber of Commerce, told The National. “Now they have kind of verbally lifted that ban.”

Sanctions have contributed to a drop in foreign currency reserves by curbing the oil sales on which the government is reliant, weakening the value of the rial and fuelling inflation, which Iran’s official statistics put at 32.5 per cent in February. Analysts also cite Iranian government spending, powered by borrowing from the Central Bank and the country’s sovereign wealth fund, as a reason for price rises.

Iranians use ATMs in Tehran. Many hope a deal between Tehran and the US could help lift sanctions and improve the economy. EPA

Under a combination of sanctions and an economy largely controlled by the state, Iranians have been unable to reach their full potential, the businesspeople said. They have borne the brunt of the embargoes, enduring power shortages, banking restrictions and limitations on access to technology as household-name computer and internet brands are widely unavailable. European-branded clothing brands do not operate in Iran, and its citizens have suffered from chronic conditions because of restricted medical treatment.

“Iranian tech companies have faced restrictions from major platforms like Google and Microsoft, limiting their ability to use development tools,” Mr Forouzanfard said. “This has forced reliance on outdated or pirated technology, stifling innovation.”

Iran’s largest exports are petroleum products, methanol and urea – a chemical compound used in agriculture and medical items. Iran produced about 3.3 million barrels of crude oil per day last month, according to the latest report by the Opec group of oil-producing nations. Of its oil exports, most goes to refineries in China, which does not recognise the sanctions, although some of those Chinese plants have also come under US sanctions in an effort to curb the trade.

If sanctions on Iran were lifted, exports of a wide range of goods to China and India could increase, and Iranian exporters would also look west to European countries, Mr Forouzanfard added.

“Key export products could include petrochemicals, agricultural goods, carpets and industrial machinery,” he said. “The petrochemical industry has the capacity to supply raw materials for global manufacturing, while agricultural exports like fruits and nuts have strong demand in international markets.”

The country's geographical location boosts its attractiveness as a logistics and trade hub, the observers said - although internally, its transport networks need serious investment to reach their potential.

"Iranian rail infrastructure is next to collapse while its civil air fleet, shipping vessels, sea ports and highways network are kept operational with a low performance," Danial Rahmat, a Tehran-based energy and geopolitics analyst, told The National.

Despite the government’s reliance on oil revenue, Iran has a relatively wide manufacturing base and its varied industries have potential for foreign investors, who could tilt Iran away from a state-dominated economy, the interviewees said.

“We have abundant petrochemicals, refineries and strong steel, cement and food production industries,” said Mr Ebad. “Of course, because of international sanctions and internal political problems, in general, they do not have huge capacity, and 90 per cent of the Iranian economy and industry is in the hands of the state and state-owned companies.”

Iran's Foreign Minister Abbas Araghchi is leading negotiations with the US on the nuclear programme. EPA

He gave the example of foreign firms that planned expansion into Iran amid the short-lived sanctions relief that followed the 2015 nuclear deal signed between world powers and Tehran under former US president Barack Obama. Donald Trump pulled out of the deal in 2018 during his first term in the White House and returned to “maximum pressure” policies on Iran. In 2017, French company TotalEnergies signed a contract for the development and production of Iran's giant offshore South Pars gasfield – the world’s largest for natural gas – but the energy giant pulled out when US sanctions were reinstated.

“We are facing a lot of problems in the oil, gas and petrochemical industries, because many high-tech technologies are available to only a relatively limited range of companies, sometimes American,” said Mr Ebad. “Often it was necessary for Iranian companies to buy their licences to be able to launch their plants, but they couldn’t.”

Iran's oil and gas sector alone could absorb $400 billion in foreign investment to boost production, Mr Rahmat said. Boosting gas production and improving the power network infrastructure would have a positive effect on the economy because currently chronic electricity shortages hamper industry and business.

"Iran didn’t manage to invest enough in its electricity generation sector for a decade," Mr Rahmat said. "This has put major businesses including heavy industries at stake due to notable electricity imbalance."

There also remain significant hurdles not related to sanctions posed by bureaucratic inefficiencies, opacity and corruption, even if the punitive measures were lifted and foreign business figures could in theory work more easily in Iran.

We are facing a lot of problems in the oil, gas and petrochemical industries, because many high-tech technologies are available to only a relatively limited range of companies, sometimes American

Mahrad Ebad,
Tehran Chamber of Commerce board member

Observers want urgent economic reforms to ease doing business for Iranians and to attract foreign investment.

“A comprehensive and well-sequenced package of reforms is needed to put the economy on a more sustainable path,” according to the World Bank’s latest Iran update from October 2024.

Mr Ebad wants the country to become a member of the World Trade Organisation and “to observe its standards”, along with reforms, “so that foreigners are interested in coming to invest in Iran”, he said.

Beyond sanctions, Iran faces challenges including bureaucratic inefficiencies, graft and a lack of transparency, Mr Forouzanfard warned.

Lengthy administrative processes for obtaining business licences and navigating customs procedures can deter foreign investors, and a lack of transparency in financial systems and inconsistent enforcement of laws create uncertainty.

“Addressing these issues would require streamlining administrative processes, implementing anti-corruption measures and fostering a more transparent regulatory environment,” he said.