Western Companies Eyeing Opportunities In Iran Should Sanctions Ease

By Meagan Clark - As Iran and six world powers approach a July 20 deadline to negotiate limits to Iran’s nuclear program, global companies are meeting with potential Iranian partners and considering restarting operations there if sanctions are lifted.

The isolated economy could become the largest market in the Middle East, with nearly 80 million people, most under 30 and well-educated, and the fourth-largest oil reserves and second-largest proven gas reserves in the world, according to the U.S. Energy Information Administration. 

Energy companies Total (OTC:TTFNF), Royal Dutch Shell (NYSE:RDSa) and ENI (NYSE:E), car maker Peugeot (PARIS:PEUP) and financial firms Deutsche Bank (NYSE:DB) and Russia’s Renaissance Capital Ltd. are among those that are considering investment in Iran, according to the Wall Street Journal. Senior executives from Total, Shell and Eni, three companies that had major oil operations in Iran before the sanctions, have met with Iran’s Oil Ministry to discuss potential returns if sanctions are lifted.

The U.S. and Iran have talked of cooperating to stifle terrorists in Iraq, but officials have said the sides are far from agreeing on a nuclear settlement. Iran doesn’t want to reduce its nuclear infrastructure to the levels demanded. In response, the U.S., United Nations and European Union have strangled the Iranian economy with sanctions—cutting the country’s oil revenues in half for example-- for what they see as Iran’s ambitions to develop an atomic bomb. Iran denies it is building up nuclear arms.

An agreement in November unfroze about $4 billion of Iran’s oil assets and eased some sanctions, and an agreement in July could lift more sanctions on Iran’s central bank and loosen restrictions on the finance, energy and technology sectors. That would free Western companies to pursue investments in potentially high-growth industries that have been off-limits for nearly a decade, though some U.S. sanctions regarding Iran’s alleged support for international terrorism and human rights abuses would likely remain.

The drop in foreign investment from the West has been more-than-filled by China, Turkey and Russia. According to the U.N. Conference on Trade and Development, direct foreign investment in Iran has risen over the past decade, reaching $5 billion in 2012. However, that's still short the $7 billion Iran had projected for that year, and as the country grows, it will need more foreign cash.

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Since taking office in August, Iranian President Hassan Rouhani has sent business diplomats into Europe and Asia to attract investment, particularly in oil, to Iran. Oil Minister Bijan Zanganeh has said that Iran could quickly boost output by 700,000 barrels a day if sanctions are lifted, the Times of Oman reported.

The round of nuclear talks begins July 16 in Vienna. Officials have said the deadline could be pushed another six months, and Zanganeh has said if the deadline isn’t met, the government will still push to increase oil production.