Marin Katusa, a portfolio manager and author of the book “The Colder War”, expects Russian, Chinese and Indian national oil companies to be major players, while Sunni Gulf states will be frozen out of Shiite Iran. The deal should also support South Caucasus via freer trade, but could have a few negative spill-over effects on Russian Federation via lower oil prices or eventual competition to supply gas to Europe.
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While the opening up of Iran after 39 years holds appeal for industries from financial services, automotive and aircraft manufacturing to makers of consumer goods, the country’s real economic attraction is always about energy 1st.
“Iran will get immediate relief primarily in the form of improved expectations, access to some restricted hard currency, and domestic investment”, said Richard Nephew, a former sanctions expert on the US negotiating team with Iran who’s now a fellow at the Center on Global Energy Policy at Columbia University in New York.
Even though the deal sets a 10-year timeframe for the lifting of nuclear-related sanctions against Iran, Kerry said United Nations tracking of Iranian centrifuge production – technology used in making enriched uranium – would last for 20 years, and tracking of its uranium mining would last for 25 years.
Iran is at a strategic location where it can benefit from the growing natural gas demand from Asian countries like India, China and Pakistan.
For major companies, one priority is for Iran to be reconnected to the global network of Swift banking transactions, so firms present in Iran can transfer funds directly to and from the country.
But there are significant exceptions to Iran’s reopening. Banks, airlines, construction companies and other entities and individuals that have been sanctioned for supporting terrorism or human rights abuses will remain on blacklists. But, foreign subsidiaries of American firms will be allowed to trade and invest in Iran. Aker Solutions, Norway’s biggest offshore engineering company, said it would be interested in returning to Iran.
“No company wants to wake up to a front-page story that its business partner is Iran’s Islamic Revolutionary Guard Corps or that the new US president has re-imposed tough sanctions”, Dubowitz said.
“The most important focus for Norwegian producers now is to reduce costs to be competitive”, said Tommy Hansen, a spokesman for the Norwegian Oil and Gas Association, a lobby group representing companies from Statoil to Royal Dutch Shell Plc and ConocoPhillips.
French Foreign Minister Laurent Fabius and Italian Economic Development Minister Federica Guidi also plan to visit Iran following the nuclear accord. Such companies include Danone, Airbus and LVMH.
Business in Iran will be complicated by its outdated legal system, restrictive labor laws and a lack of experience by many in dealing with global investors. In a first step to begin normalization of trade between Tehran and Britain, the export credit agency in the UK it was planning to review the creditworthiness of Iran. “Banks are highly risk-averse and will remain hesitant” for a long period of time, he said. “Of course we shouldn’t be naive about the Iranian regime and some of the things they do and we need to call them out on those things”, the British premier added.
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Iran, which has the world’s fourth-largest oil reserves, has seen its production fall to less than three million barrels per day (bpd) since 2012.
