8 Responses to the Iran business

It was two years ago this summer that the international community relaxed its economic sanctions against Iran. The FAZ summed up the expectations of the export industry for Iran as follows: “A country with a population of Germany and great potential in terms of people and raw materials, in which market shares hover: the country has to be completely redistributed: Where else in the world is there such a thing?”

And yet there are also questions about the current situation in Iran. Here are eight answers. If you want to know more, come to the Forum Logistics Market Iran: Opportunities and Rules of the Game in Forum I

How is the Iranian economy developing?

For the Persian year 1395 (2016/17), which ended on 20 March 2017, the foreign trade experts at Germany Trade & Invest (GTAI) expect Iranian gross domestic product to grow by 5.0 percent (compared with 1.3 percent in the previous year). The current increase was due to higher production of oil and gas. Since January 2016, when the relaxation of sanctions came into force, production has doubled. Crude oil production is now reaching its former level of 3.9 million barrels per day (average in October 2016).

How does the money get into the Iranian economy?

The oil boom is also increasing oil exports, which are flushing important foreign currency into the state coffers. According to Bloomberg, Iran has been exporting an average of 2.45 million barrels a day since February 2017. According to current plans, Tehran plans to reach a production level of five million barrels per day by 2021.

Which companies are interested in the country?

Suppliers of technical solutions for the oil and gas industry as well as for the water and energy sector, including renewables, have particularly good prospects in Iran. As far as infrastructure is concerned, several airports are to be expanded and new ones built, the railway network modernized and the ports expanded. The planned integration of the country into the “New Silk Road” initiated by China also opens up prospects for the logistics industry.

How active is Germany in the Iranian market?

After a rather restrained start in the first and second quarters of 2016, German exports picked up speed in the course of the year. Compared with 2015, they grew by around 27 percent to 2.6 billion euros. German exports are thus approaching the level before the sanctions. According to market observers, an export volume of ten billion euros should be possible in the medium term.

How complicated is the customs clearance of imported goods in Iran?

The time required for customs clearance usually depends on the scope of delivery, i.e. the number of customs tariff numbers and product licenses. If the goods are well prepared, our experience shows that they are usually imported duty paid and delivered to the customer within one to two working days. The import sales tax currently amounts to nine percent of the value of the goods sold.

Iran collects no or reduced customs duties for assembly services, production set-up, and contract finishing processes. Special provisions apply to imports via free trade zones and special economic zones. They are located on important transport routes, often close to border crossings and ports. No import licenses are required in the free trade zones.

Where is the greatest need for consulting for German companies?

Most of the pitfalls lurk in export control. It is regulated in the EU embargo regulations, the EU dual-use regulation and – for German companies – in the foreign trade regulation (AWV). Not only weapons and armaments are affected by export controls: EU rules apply to goods that can be used for both civil and military purposes (dual-use goods). This includes spare parts, software, and technologies.

How do you finance business in Iran?

None of the major European credit institutions, such as Deutsche Bank, currently serves the Iran business. If they did, they would face horrendous fines in the US. So far, only smaller banks that neither conduct US transactions nor hold US assets are cooperating with Iran. Examples are Raiffeisen Bank and Erste Bank in Austria, Mediobanca and Banco Popolare in Italy, the European-Iranian Trade Bank in Hamburg, KfW and the export credit bank AKA, the Belgian KBC, the Dutch ING, the Turkish Halk Bank, the Danske Bank and the Alpinum Bank from Liechtenstein.

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