During the first few days of 2016, the Iranian Petrochemical Commercial Company (IPCC) had one of its European bank accounts reactivated, the first time this had happened in five years.
According to Mehdi Sharifi Niknafs, the Executive Director of IPCC, this was one the final stages for the opening up of trade, including in petrochemicals, between Iran and much of the rest of the world.
The Spanish bank account was opened following the signing of a deal between IPCC and the association of Spanish manufacturers, and allows for the transferral of funds for import and export sales. Furthermore, money held in the bank account for the past five years has also been released, and has been received by IPCC.
As Niknafs told the Mehr News agency, “On the basis of the reached agreements and receiving of official approvals [by] the government and central bank of Spain, the limitations of receiving of money as well as export of products from various world countries were practically removed.” He continued by explaining that, this was “… due to the withdrawal of restrictions on the sale of petrochemical products from the list of international sanctions during the preliminary agreement between Iran and [the group of] 5+1 in Geneva. [As a result] IPCC will proceed along the planned route for the sale of petrochemical products.”
The ending of restrictions on movement of money has been seen by many as proof that trading with Iran can truly begin. Due to export restrictions, Iranian petrochemical production has been running at under capacity for years, and now many businesses are keen to restart trading. This is because not only does Iran have massive oil reserves at low production rates, but also requires infrastructure and petrochemical production development after so many years in the wilderness. Whilst domestic markets are also set to open up to foreign imports, allowing for further business opportunities for a range of retail and industrial products for Iran’s 80 million population.
In Europe, whose chemical industry has been stagnating for over a decade, firms are rushing to engage in deals for all manner of products, as the raising of the trade embargo is seen as a chance to gain a strategic advantage over the US, which is still largely limited in its freedom to do business with Tehran.
As David Smith of the British newspaper, the Guardian, reports, “American companies risk missing out on a ‘gold rush’ in Iran when sanctions are lifted as expected this year under the controversial nuclear deal. Although US companies’ foreign subsidiaries will be allowed to engage with Iran, a minefield of regulatory, transparency and legal issues could present more risk than reward in the eyes of many. Investors are also likely to be wary of the next US presidential election, with Republican candidates vowing to scrap the deal if they come to office. Other countries, however, appear to have embraced the deal and Iran’s potential as a sleeping giant.“
Whilst this certainly does look like a golden opportunity for European firms to do business in a fresh market, many are still not convinced that it will be enough to return the European chemicals industry to the ‘good old days‘.
Others are more optimistic and are wondering if Iran could save the European Chemicals Industry.