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Live From SMME 2016

The post-sanctions trade ball is in Iran’s court, potential investors told 

The post-sanctions trade ball is in Iran’s court, potential investors told 

Iran must take the initiative to facilitate trade or risk losing huge foreign investment opportunities opened up by the lifting of nuclear sanctions in January.

That was the stark warning from a panel of experts assembled for an “Iran Investment Forum” on the final day of the 8th Seatrade Maritime Middle East (SMME) conference and exhibition in Dubai.

The reluctance of international banks to recommit to Iran, complex legal and business compliance issues and its well-documented geopolitical issues has ensured foreign investment in the oil and gas sector had moved at a trickle since the 16 January implementation of the Joint Comprehensive Plan of Action. Those challenges have been compounded by the repeated postponement of Iran Petroleum Contract (IPC) meetings planned for London and Geneva while the impending US and Iran presidential elections were also serving to spook potential foreign investors.

The SMME conference panel agreed that Iran had a window of opportunity that could slam shut if it did not react to opportunities quicker.

Petroleb coo Dr Naji Abi-Aad gave an example of a gas pipeline between Iran and Pakistan where Pakistan had been forced to import LNG from elsewhere as the pipeline remained inactive despite repeated Iranian promises.

Abi-Aad said business norms in Iran would not wash internationally much longer.

“I just want to say in Iran, to create a nice carpet you need 10 years. But the Iranians must understand that putting together a good business model will need less than that because business opportunities are everywhere, the gas market is going down, the oil market as well…but Iran must move now,” Abi-Aad said.

“After the lifting of sanctions the Iranians were expecting everybody to come and rush for Iran, asking for business. But they forget they have to improve the framework as fast as possible. This is really a must now otherwise I believe in every sector, especially in oil and gas, the opportunities will vanish, for gas for sure and maybe for oil.”

Bill Farren-Price, ceo at Petroleum Policy Intelligence, is not confident quick progress is possible.

“I was discussing this years ago with an Iranian official about the proposed gas deal with India and the issue was around price, as there usually is, and their attitude was, well, the gas is not going anywhere, we’ll wait until they agree to our price. But that is not necessarily the urgency you will need to get deals over the line,” he said.

Farren-Price identified “low hanging fruit” for the tanker and offshore sectors around a massive development connected to the West Qurna oil field near the Iran-Iraqi border. But that would depend on the oil majors getting contracts they could work with otherwise Iran would find itself “limited by its access to capital”, Farren-Price said.

“I think the Iran government, in as much as it can control policy, needs to push forward very distinctly and lay out the basic vision for investment in the oil and gas sector. And it has to be done with a little bit more urgency frankly,” Farren-Price said.  

“There always seems to be a reason with Iran why there needs to be six month delay. They need to resolve this, fix the IPC completely, or provide an alternative, and then they will win the prize which is the investment by the G20 IOCs (international oil companies) and they will not have to rely on investments from either within or countries where the investors are less preferable to them.”

Patrick Murphy, from the dispute resolution group at Clyde & Co, agreed exciting opportunities existed in Iran but acknowledged the US dollar currency elephant in the room when asked what could accelerate trade opportunities.  

“It would probably take one, two or three large banks to dip their toes in the water and say, yes we are going to start supporting business with Iran because then the fourth, fifth, sixth and seven can all say ’this is great, we are going to follow you now’,” Murphy said. 

“Until that happens, and whether that is even realistic, things are still going to be pretty heavy going.”

Atousa Mahmoudpour, who has previously practiced law in Iran, said Iranians themselves needed to “educate themselves” to understand the co-operation required for foreign entities to be able to invest in the country. 

“I was speaking at an oil and natural lubricant conference two weeks ago and a lot of Iranians attended this event and surprisingly a lot of them had no idea about the (business) basics we already know about, international rules and regulations, namely due diligence is a foreign concept to them,” said Mahmoudpour, head of the Iran desk at Dubai-based Fitchte Legal Consultants.

“More Iranians should seek to understand what is needed to facilitate doing business with Iran, it would make everyone’s life so much easier, such as obtaining documentation from Iranian [business partners and shareholders for example] to make the whole transaction a lot smoother.”

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