- The Washington Times - Monday, January 18, 2016

That didn’t take long.

Literally hours after the ink had dried on the accord lifting international economic sanctions on Iran, big-name companies across Europe and Asia were signing deals, major world leaders were booking trade missions to Tehran, idled oil fields were being ordered back online, and Iran’s financial authorities had processed applications for some 1,000 letters of credit from businesses hoping to cut deals in the near future.

Analysts are warning the lifting of sanctions as part of the Obama administration-backed nuclear deal will not provide an instant solution to Iran’s many economic woes, including high inflation, falling oil prices, an aging infrastructure and a still-powerful mix of sanctions limiting investment by U.S. companies. But the announcement this weekend that many sanctions were coming down sparked a rush of new deals from companies that had clearly been waiting for the gates to come down.

“The legs of Iran’s economy are now free of the chains of sanctions, and it’s time to build and grow,” Iranian President Hassan Rouhani, whose own political future may hang in the balance if the economic payoff does not come, said in a tweet Sunday.

Among the very first fruits of the nuclear deal: European aircraft giant Airbus announced Saturday — the day the sanctions ended — that it had a deal to sell 114 planes to state carrier Iran Air, a deal with a potential price tag of over $10 billion.



On Monday the Iranian news agency IRNA reported that the truck division of German automaker Daimler had signed letters of intent to create two joint ventures with Iran Khodro, the biggest car manufacturer in the Middle East, for a “comprehensive re-entry” into the Iranian market. Officials at Daimler, who had a sizable slice of the Iranian truck market before sanctions forced the company to withdraw in 2010, forecast Iran will need to replace some 56,000 commercial vehicles over the next five years.

“There is a huge demand for commercial vehicles in Iran and we plan to quickly resume our business activities in the market there,” Daimler Trucks chief Wolfgang Bernhard told the Iranian news service.

Iran has also vowed to make up for lost time and lost markets in oil, where its vast reserves have been kept off the world markets because of the sanctions. But the recent plunge in oil prices — and the prospect that increased Iranian production will only increase the glutted supply pipeline — have sharply cut into previous estimates of how much Tehran will profit from the end of sanctions.

Deputy Oil Minister Roknoddin Javadi said on the ministry’s website Monday that officials had issued a former order designed to boost production by at least 500,000 barrels a day in a bid to reclaim export markets lost under the sanctions. The country exported some 2.3 million barrels a day at its height, but those sales fell by more than half in the sanction years.

Mr. Javadi said Iran plans an aggressive push to woo buyers in markets such as India and China, promising aggressive pricing and more generous buyback terms. Foreign investors are also being offered attractive terms to provide some of the estimated $30 billion in infrastructure development needed to rebuild Iran’s energy sector.

IRNA also reported Monday that Iranian businesses had opened over 1,000 letters of credit on the first day of sanctions relief to finance hoped-for deals. The letters of credit had been issued through the Central Bank of Iran, the national Chamber of Commerce and the Ministry of Industries, Mines and Trade.

And Iranian Supreme Leader Ayatollah Khamanei on Tuesday broke his silence on the sanctions moves taken over the weekend, congratulating President Rouhani for the success of the nuclear deal but warning the government to be vigilant about Washington’s ultimate motives.

“I express my satisfaction about the resistance of the great Iranian nation against the unfair sanctions,” the ayatollah said, but he immediately stressed “the need to be vigilant about the deceit and treachery of arrogant countries, especially the United States, in this [nuclear] issue and other issues.”

Testing the waters

The rush of deals so quickly is not totally unexpected, as European and Asian companies had been openly testing the waters for much of 2015 as the nuclear negotiations were progressing. Many foreign companies had already identified deals or informally signed up domestic partners in anticipation of sanctions relief.

President Rouhani said over the weekend that at least 150 companies from 50 countries had made trips to Iran before the sanctions relief last year seeking opportunities.

But skeptical analysts note that the president and the so-called “moderates” that support him have a clear self-interest in talking up the economic benefits of the deal. The president faced sharp resistance from hawkish hard-liners throughout the nuclear talks, who warned that cutting a deal with the United States and the West could undermine the Islamic republic.

And the sooner the payoff comes, the better for the president. Iran voters go to the polls Feb. 26 to elect a new parliament as well as the members of the body that would select the next supreme leader, and a hard-liner victory in those votes could make life politically difficult for the president.

Another quick payoff of the nuclear deal for Iran could be arriving in the person of Chinese President Xi Jinping, who will travel to Tehran next week for the first visit by a Chinese president in 14 years. (The Chinese leader will also be making stops in Saudi Arabia and Egypt on his trip.)

China is already Iran’s largest trading partner, and Mr. Xi is reportedly bringing a large business delegation in the hopes of striking new deals both in the energy and consumer sectors. Iran also represents a key geostrategic link in Mr. Xi’s much-touted “One Belt, One Road” program to revive transportation and trade links along the old Silk Road.

“If there is a strong Iranian economic recovery now that sanctions have been lifted, this could create a fast-growing market for Chinese manufacturers in a wide range of sectors, such as automobiles, power infrastructure as well as consumer goods,” Rajiv Biswas, Asia-Pacific chief economist for the consulting firm IHS, told the German DW news service.

Others said to be booking trade trips to Tehran this spring include British Chancellor of the Exchequer George Osborne and German Economy Minister Sigmar Gabriel.

There are some openings for American firms as the sanctions come off. Boeing is expected to seek deals of its own to help upgrade Iran’s creaky domestic airline fleets. Foreign subsidiaries of U.S. companies are also now freer to pursue deals with Iranian partners.

But public opinion and the overhang of U.S.-specific sanctions that are still being applied to Iran make it likely that European and East Asian firms will enjoy a clear head start as the Iranian economy opens up.

While Daimler was one of the first Western carmakers to make a move in Iran, Opel, the German-based subsidiary of GM, acknowledged it was still holding back.

An Opel spokesman told the Reuters news agency Monday that “U.S. sanctions continue to place significant limits on GM and its non-U.S. operations.”

“Accordingly, our position toward trade with Iran remains unchanged,” the spokesman said.

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