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 in July 2015. The agreement, which is known as the Joint Comprehensive Plan of Action (JCPOA), was 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 US’s attempt to reach this settlement under former President Barack Obama was 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. Donald Trump has reaffirmed the US’s commitment to the Middle East since taking office, with greater engagement with the Gulf Arab monarchies and threats to push back against Iran in the region. Trump’s policy towards Iran is officially under review, though the rhetoric and threats are significantly more hostile than they were under Obama.
The implementation of the JCPOA began to 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.
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 political figures, 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: conducting banking given the restrictions many international banks put on business with Iran; understanding the political connections of domestic competitors; embedding anti-bribery and corruption policies in your operations; and ensuring that your intellectual property is protected. Furthermore, the decision to invest or operate in Iran will remain politically sensitive on multiple levels for the foreseeable future. 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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