By Asa Fitch and Benoit Faucon
After years shunning Iran, Western businesses are bursting
through the country's doors.
France's Peugeot and Renault SA are building cars. The U.K.'s
Vodafone Group PLC is teaming up with an Iranian firm to build up
network infrastructure. Major oil companies including Royal Dutch
Shell PLC have signed provisional agreements to develop energy
resources. And infrastructure giants, including Germany's Siemens
AG, have entered into agreements for large projects.
After Iran's nuclear accord with world powers lifted a range of
sanctions, many foreign investors began to push into the promising
market of 80 million people, setting off skirmishes among European
and Asian companies eager to gain a step on more cautious American
rivals.
Peugeot Middle East chief Jean-Christophe Quemard says his
company's early entry has left American competitors in the dust.
"This is our opportunity to accelerate," he said in February.
U.S. companies are at risk of losing lucrative deals to early
movers into the Iranian market, analysts say. But as latecomers,
the companies likely won't face a learning curve in dealing with
the political risks and the bureaucratic difficulties in Iran.
Apple Inc. explored entering Iran after the Obama administration
allowed the export of personal communications devices in 2013,
according to people familiar with the matter. But the company
decided against it because of banking and legal problems, these
people said. Apple declined to comment.
U.S. companies usually need special permission from the Treasury
Department to do business with the country. So though the
Chicago-based Boeing Co. got the go-ahead to sell 80 craft worth
$16.6 billion to Iran last year, the list of American firms with
significant Iranian deals is a short one.
Further complicating matters for U.S. firms: President Donald
Trump threatened to rip up Iran's nuclear deal during his campaign
and he hit the country with new sanctions shortly after taking
office. On Sunday, Iran imposed its own sanctions on 15 American
companies, mainly defense firms.
The nuclear deal removed a range of U.S., European Union and
United Nations sanctions in 2016 that had held back Iranian energy
exports and put the brakes on foreign investment. In exchange,
Tehran agreed to curbs on its nuclear program. But while food,
medicine and agricultural products are exempted from U.S.
restrictions, American products are available in Iran often only
through foreign subsidiaries or third-party importers.
Two of the world's biggest auto makers, Ford Motor Co. and
General Motors Co., have steered clear of Iran since the nuclear
deal. A spokeswoman for Ford said the company was complying with
U.S. law and didn't have any business with Iran. GM is focusing "on
other markets, and other opportunities," said spokesman Tony
Cervone.
Meanwhile, Peugeot, officially known as Groupe PSA SA, is aiming
to hit annual production of 200,000 cars in Iran by next year in
conjunction with its partner Iran Khodro, after the two signed a
400 million-euro (about $430 million) joint-venture agreement in
June. Already, the pace of both Peugeot's and Renault's car sales
in Iran has more than doubled. In February, Renualt sold 15,230
vehicles in Iran, up 175% from a year earlier.
On a recent visit in Tehran's biggest hotels, lobbies were full
of foreigners huddling with prospective Iranian partners. A packed
automotive conference in February drew top executives from Peugeot,
Renault and Citroën. The same day, the Swedish prime minister was
visiting a Scania truck factory west of the capital following its
deal to supply Iran with 1,350 buses.
Iran has caught the attention of a broad spectrum of investors
beyond autos, with foreign companies selling everything from
gas-powered turbines to mining technologies in the country.
Government-approved foreign direct investment shot up to more
than $11 billion last year, official figures show, from $1.26
billion in 2015. Pedram Soltani, the vice president of Iran's
Chamber of Commerce, said more than 200 foreign business
delegations have visited Iran since the nuclear deal took
effect.
"We see what's happening in the U.S. and Mr. Trump's comments,"
says Ghadir Ghiafe, an Iranian steel-industry executive who is
exploring partnerships with South American and European companies.
"Our businessmen don't pay much attention to it."
Foreign firms still face daunting obstacles to do business in
Iran. Iran placed 131st out of 176 countries for corruption in a
ranking by Transparency International last year. It also has major
economic problems, including high unemployment and a banking system
saddled with bad loans. Large international banks remain reluctant
to re-establish links with Iran despite the nuclear deal. That
reluctance has made transfers of money into and out of Iran a
challenge.
Some large multinationals -- including major oil companies and
infrastructure giants -- are keeping a close eye on the U.S. and
its new president, in case sanctions snap back into place. Shell,
Total SA of France and OMV of Austria have signed memorandums of
understanding for deals in Iran but have yet to finalize terms.
Last month, Total Chief Executive Patrick Pouyanne said the
company would wait for clarity from the Trump administration before
completing a $4.8 billion investment in the country's huge South
Pars offshore gas field.
But many foreign firms are finding the country's growth hard to
ignore.
The International Monetary Fund recently estimated the economy
grew by 7.4% in the first half of the Iranian fiscal year that
ended this month, rebounding from a decline in the previous year .
Meanwhile, a surge in demand has pushed consumer spending in Tehran
to $5,240 per capita in 2017, up by around 11% compared with 2016,
according to the London-based Planet Retail.
The upshot is even if there is demand to buy American, much of
Iran's market is left to European and Asian firms.
"The market is now more diverse with Chinese cars and we realize
how important it is to have satisfied customers," says Mohsen
Karimi, a sales manager at Iran Khodro, a domestic auto
manufacturer that has a partnership with Peugeot. Khodro had sold
out its stock of cars this past year, and was now behind delivery
targets for advance sales, added Mr. Karimi.
Like many Tehran residents, Alireza Aniseh wanted his first car
to stand out in a streetscape filled with boxy Iranian models. The
24-year-old says he is leaning toward buying a Toyota Corolla or
Camry, but his dream is owning a Ford Focus.
"Who doesn't love American cars?" he says.
--Aresu Eqbali contributed to this article.
(END) Dow Jones Newswires
March 27, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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