French business delegation aims for early bird advantage in Iran

A delegation of more than 100 French companies is set to visit Tehran on Monday in the biggest demonstration of western business interest in Iran for more than a decade.

The three-day visit, which includes top French companies such as oil major Total, engineer Alstom, telecoms group Orange and carmaker Renault, has raised hopes in Iran that an interim deal on its nuclear programme could lead to a return of foreign investment. This was sharply curtailed after sanctions were imposed in retaliation for Tehran’s perceived bid to acquire nuclear weapons.

Although France has adopted a tough stance against Iran’s nuclear programme, it is also moving quickly to position French business to take advantage of last month’s potential opening up of a big new market for its companies. The French delegation includes government representatives but not France’s two big nuclear power companies, Areva and EDF.

Other countries are also preparing to seize opportunities which may be created if sanctions are eased. A German business delegation, comprised of specialised companies in the food industry, health, spare auto parts industries, as well as in urban planning and engineering, is due in late February. A Dutch delegation is also expected soon.

Meanwhile, rumours are rife in Tehran that American companies through their representatives in other countries are also negotiating with senior Iranian officials.

“When European businessmen walk out of their meetings with Iranians, they sometimes notice US companies’ representatives walk in,” said one western market analyst. “Americans can deprive Europeans of some opportunities but their presence is encouraging that sanctions may be lifted.”

Medef, the employers’ federation which is leading the French delegation, said it had received huge demand when it announced the trip after making a preliminary visit in December.

“Although the recent nuclear deal only offers limited lifting of sanctions, there is a new dynamic. The possibility of access to a market of 80m people is very attractive,” said a Medef official.

“Of course, European companies have to rush and be prepared before American companies come,” said one western diplomat in Tehran.

Companies on the trip include representatives from consulting, asset management, engineering services, the food industry, shipping, law, insurance, advertising, construction, pharmaceuticals and sports training, as well as one bank.

Organisers stress that the visit is exploratory and aimed at contact-making, with no contracts expected at this stage. “It is a prospective visit,” said a spokeswoman for Lafarge, the leading building materials supplier that has operations in neighbouring Iraq and Pakistan.

Many European companies, including from France, Germany and Italy, either left Iran or scaled back in recent years due to the imposition of sanctions and anti-western policies pursued by former president Mahmoud Ahmadi-Nejad, which resulted in unattractive investment terms.

But the victory of centrist president Hassan Rouhani last summer paved the way for the Islamic regime to strike an interim nuclear deal with six major powers – the US, UK, France, Russia, China and Germany – in November, which took effect in January.

Iran has since started restricting its uranium enrichment activities while sanctions have been suspended on certain sectors, such as petrochemicals and auto companies. Frozen Iranian funds worth $4.2bn will gradually be released over the next six months. However, oil and banking sanctions – the most crippling of all – will remain in force during this period.

“In recent years, the cold weather of sanctions was hitting our face, but now we feel warm weather is touching our back,” said Daniel Bernbeck, managing director of the German-Iranian Chamber of Industry and Commerce in Tehran.

Iran’s business community desperately needs foreign investment and technology to revive many industries, including car manufacturers and spare parts producers which were dependent on France’s Peugeot and Renault. Most domestic industries have either gone bankrupt or operate far below their capacity due to previous populist policies and sanctions.

Renault, which was selling nearly 100,000 cars a year in Iran before sanctions came into force, has already resumed shipments to Iran and expects its car production in the country to pick up in the first half of this year.

Rival French carmaker PSA Peugeot Citroën, which sold 458,000 cars in Iran in 2011, accounting for nearly a third of the total market, is also poised to return to the country, which was once its second largest market after France.

Jean-Baptiste de Chatillon, Peugeot’s chief financial officer, said last year that the sanctions had cut €10m a month from operating profit. Renault took a €512m writedown on its Iran operations last June.

Despite uncertainty whether the nuclear agreement will lead to a long-term solution, some Iranian businessmen say there is a high chance of tentative deals being agreed with visiting business delegations that they can turn into contracts as soon as a permanent deal is done.