* Cars, aircraft parts, medicines, consumer goods top
* Payments bottleneck will constrain Western business
* Oil majors eager but await full nuclear deal
* Vested Iranian interests may block foreign investment
By Paul Taylor
PARIS, Jan 17 Iranian President Hassan Rouhani
will court global business in Davos next week after winning an
easing of some economic sanctions, but any trade bonanza depends
on the long-term success of nuclear diplomacy.
A U.S. stranglehold on Iran's access to the international
financial system, the uncertain future of talks on its nuclear
programme beyond a six-month initial deal, and vested interests
in the Islamic Republic suspicious of Western investment all
stand in Rouhani's way.
"I would be surprised if you saw Iran shooting quickly to
the top of the list of attractive markets, although it may be
attractive for certain manufactured goods companies in the short
to medium term," said a Western business consultant who works
with many of the world's biggest companies.
"The fact that Iran is making signals in the right direction
is welcome but I think the bulk of business people will be
cautious and will play a bit of a wait-and-see game," he said,
asking - like many involved with Iran - not to be identified due
to the political sensitivities.
After a charm offensive at the United Nations in September,
the pragmatic Rouhani opens Act Two of Tehran's return to the
international stage when he addresses the World Economic Forum
at the Swiss resort on Thursday, an event that attracts
political and business leaders from around the world.
The White House released a summary on Thursday of last
November's interim deal between Iran and six world powers, under
which Iran agreed to stop production of 20 percent enriched
uranium by Jan. 20.
In return some sanctions imposed over the nuclear programme
- which Western countries suspect is aimed at developing arms
despite Iranian denials - will be relaxed from Monday.
In the short term, business opportunities are limited mostly
to areas such as food and consumer goods, medicines, cars and
petrochemicals under the interim accord. Iran will be able to
spend $4.2 billion in unfrozen funds over six months, although
most sanctions remain pending a long-term agreement.
But the potential of a market of 76 million people in a
country with some of the world's biggest oil and gas reserves is
a magnet for foreign firms seeking long-term opportunities.
Iran has said it wants seven energy companies - Shell
, Total, ENI, OMV and
Statoil from Europe, as well as U.S. majors Exxon Mobil
and ConocoPhillips - to return.
French auto makers Renault and Peugeot
attended an automotive conference in Iran already last November,
while Iran's ancient airline fleet may one day offer
opportunities to Boeing and Airbus.
Bijan Khajehpour, a Vienna-based Iranian business
consultant, said there were the beginnings of a "gold rush" mood
in Tehran, with Russia and China racing to pin down
oil-for-goods barter deals before Western companies arrive with
the technology that Iran most wants. "We're getting enquiries
now from a lot of old clients and some new clients," said
Khajehpour, managing partner of Atieh International.
Iranian officials want to orchestrate a race between
European competitors - and eventually U.S. corporations - for
the best deals. However, most of these can be struck only if
sanctions go altogether under a final settlement.
"American companies are very eager to enter Iran's market,
from car manufacturers to aircraft makers," a senior official
told Reuters on condition of anonymity. "They are preparing the
ground for the time when the sanctions are lifted."
Among the most promising sectors in the short term are
autos, pharmaceuticals, food and consumer goods, Khajehpour
said, with oil and gas production and technology and aircraft
the biggest longer-term prospects.
A spokeswoman for Tehran's Homa hotel, a centre for
international business, said numbers of European guests had
risen 30 percent from last year. However, neither the hotel nor
flights to the capital are full.
Trade delegations from Turkey, Georgia, Ireland, Tunisia,
Kazakhstan, China, Italy, India, Austria and Sweden have visited
Iran since early December, according to Mehrdad Jalalipour,
director of Iran's Trade Promotion Organisation.
British lawmakers were there this month and a posse of
senior French industrialists is off to Tehran on Feb. 2-5.
MORE ATTRACTIVE TERMS?
European oil majors were among the last big Western firms to
abandon business with Iran in 2012 and may be among the first to
return. Sanctions have cut Iran's oil exports by more than half
over the past 18 months to about 1 million barrels a day, and
Oil Minister Bijan Zanganeh plans an investment conference in
London later this year, Iranian officials say.
Khajehpour said Tehran understood no Western company would
return on the terms imposed in the past, which complied with
Iran's ban on foreign ownership of its hydrocarbon resources.
A government commission reviewing investment terms is due to
report in April, and it was bound to make conditions more
attractive even if they fall short of the production sharing
agreements preferred by the oil majors, he said.
Germany and Italy were Tehran's two biggest trading partners
before the sanctions, selling mostly machinery and chemicals in
return for oil.
Sanctions have impoverished many Iranians. The International
Monetary Fund estimates gross domestic product per capita shrank
by almost half to $6,500 last year from $12,000 in 2012 on a
purchasing power basis.
Iranian political analysts say Rouhani needs to create an
early "feel-good factor" from the easing of sanctions to rally
public and establishment support for a nuclear compromise.
Cars may offer a quick win. Iran was one of the world's top
10 markets with demand of 1.5 million vehicles a year in 2011
before sanctions tightened. That has fallen to about 800,000 but
could rise rapidly, a regional automotive executive said.
Renault, Peugeot, Nissan, Suzuki, KIA
and Mazda used to supply kits to Iranian
partners who assembled the vehicles. Now Chinese firms have
partly filled the gap, raising their market share from barely 1
percent to 5-6 percent, the executive said.
European manufacturers' share has fallen from 40 percent to
around 10, he said, requesting anonymity. They are eager to
resume supplying kits and parts but a major snag remains.
"We still have a blockage on financial flows. So nobody is
motivated to send parts and produce there because you are not
going to be paid," he said, requesting anonymity.
The Iranian aviation sector is on its knees, keeping vintage
planes in the air with home-made or cannibalised spare parts,
due to U.S. sanctions in force since 1979.
Iranian airlines need an estimated 400 new planes,
Khajehpour said. For now, they can buy only parts but Boeing and
Airbus can cash in, if and when sanctions are fully lifted.
"NOT OPEN TO BUSINESS"
U.S. Treasury Under Secretary David Cohen visited Europe
this week to discuss continued enforcement of sanctions that
have largely shut Iran out of the global payments system.
A senior U.S. official said Cohen had conveyed a firm
message. "Iran is not open to business," the official told
reporters. "There are certain openings but they are limited.
"The message to the business community is that if you think
we have removed sanctions, that is a misimpression. The
sanctions regime remains in place," he said.
A U.S. official said on Friday the $4.2 billion of Iranian
funds freed up under the interim deal was only a fraction of its
total frozen foreign exchange assets around the world, which the
official put at about $100 billion.
Western critics of the interim agreement say even limited
trade openings will ease the pressure on Iran to abandon its
suspected quest for a nuclear weapons capability, and may
inadvertently feed the nuclear supply chain. Tehran insists its
atomic programme is purely for civilian purposes.
Emanuele Ottolenghi, senior fellow at the Washington-based
Foundation for the Defence of Democracies, said even apparently
harmless goods such as dental implants and crowns contained
titanium and beryllium that had nuclear applications.
By increasing tenfold to 400,000 euros ($543,800) the size
of banking transactions exempted from prior authorisation, the
European Union would make it easier to sell speciality hi-tech
equipment to Tehran, he said.
"I don't mind Italian designers selling high-end shoes and
furniture, or Germans selling fancy bathroom installations, but
I'm concerned about the areas chosen for easing sanctions such
as automobiles and petrochemicals which lend themselves to dual
(civilian/military) use," Ottolenghi said.
As in other countries emerging from sanctions, there will be
losers as well as winners, and some prospective losers may see
an interest in sabotaging the nuclear negotiations.
Hardline clerics close to Iranian Supreme Leader Ali
Khamenei, Revolutionary Guards commanders and the intelligence
services have attacked the temporary concessions Rouhani has
made, although Khamenei has so far backed the president.
Some have their own business interests in sanctions-busting
and covert procurement chains for the military and nuclear
industries, and may resist anything more than a limited trade
opening to ease public exasperation with the sanctions.
"It's not about the national interest but individual
interests," said dissident journalist Nooshabeh Amiri, who fled
Iran to France in 2005.
Among the likely winners are Dubai, long a trade gateway for
Iran whose rulers have reluctantly complied with the sanctions
to the fury of a powerful merchant class.
"The partial relaxation of sanctions on Iran is manna for
Dubai," said Jim Krane, a research fellow at Rice University's
Baker Institute in Houston, Texas. "More than 10,000 Iran-linked
businesses operate in Dubai, most of which focus on re-exporting
goods and technology that Iran cannot otherwise get."
The relaxation of sanctions may also ease gas exports from
Iran, he said. Oman signed a 25-year deal to import Iranian gas
but has been reluctant to follow through for fear of violating a
trade deal with the United States. The interim deal might offer
the political cover to start work on a pipeline.
However, some Iranian middle-men who thrived under sanctions
are fretting about events since Rouhani won power in June,
vowing to improve relations with the outside world.
One such is 53-year-old Mohammad, who imports goods from
Europe and the Middle East, helped by his German citizenship
while colleagues without foreign passports have struggled. "Two
months after Rouhani's election, I noticed that the companies I
used to deal with adopted a wait and see policy, hoping to do
business directly with the government," he told Reuters.
"A German businessman from whom I bought second-hand textile
machines told me openly he had approached the (Iranian) embassy
to visit Tehran and he prefers to sell the machines to the
government directly," he said. "This deal has ruined my position
and my business. Neither side needs me anymore."