Iran and the P5+1 (the five permanent members of the UN Security Council and Germany) reached a comprehensive agreement about Iran’s nuclear programme on 14 July 2015. The agreement, which is known as the Joint Comprehensive Plan of Action (JCPOA), is the culmination of almost two years of negotiations aimed at reducing Iran’s capability to develop a nuclear weapon and, in return, suspend or remove associated UN, US and EU sanctions imposed on Iran’s economy.
The agreement will have long-term, significant implications for politics and security in the Gulf and the broader Middle East. The US’s attempt to reach a settlement with Iran is not solely driven by concerns over Iran’s nuclear weapon capability, but also by a desire to reposition the US’s role and involvement in the Middle East, a dynamic that has already been felt and in many ways reacted to in the Gulf.
The prognosis is clearer for business. The implementation of the JCPOA should open up the largest – and one of the few remaining – closed economies in the world. Iran has a diversified economy, with a large consumer base and significant manufacturing and industrial activity. It has a young, educated population – 60% of which is under 30 – and a growing middle class with a visible appetite for consumer goods. Finally, Iran is one of the most successful markets for some of our clients with the legal space to have continued working there in recent years.
Maximising these opportunities requires thorough planning and strong risk management – the challenges of ensuring compliance with sanctions and navigating the nexus between local business interests and politicians are the immediate considerations that come to mind. However, companies that have continued to work in Iran in recent years – even under sanctions – will tell you about a range of other challenges that they face there.
These include raising capital and conducting banking, understanding the political connections of domestic competitors, embedding anti-bribery and corruption policies in your operations, and ensuring that your intellectual property is protected. Some of these risks are likely to change as domestic politics and international business reacts to the implementation of the JCPOA.
Finally, one issue that may not get the attention it merits from companies considering business in Iran is the impact of doing business in the Islamic republic on a wide-range of stakeholders. The decision to invest or operate in Iran will remain politically sensitive on multiple levels for the foreseeable future. Everyone will have an opinion on this matter: employees, directors, shareholders, business partners, the media and lobby groups opposed to Iran. They will ask questions and expect you to have good answers to their questions. Reputational risk management and an effective communications strategy will therefore be another key element of any successful entry into Iran.
For more analysis and information on Iran and Control Risks’ experience there, please visit the links below.
If you are considering investing in Iran, Control Risks will be happy to share examples of how we have supported other companies in managing risks and compliance challenges as they were planning their market entry into Iran or doing business there.
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