Visiting business delegations are streaming into Iran with an eye on lucrative new deals before a June 30 deadline for a sanctions-lifting nuclear agreement with six world powers.
Tehran saw "an explosion" of foreign business delegations in the weeks after the framework for a nuclear accord was announced in March. "Everyone is now waiting for the end of Round 2 in June," said Heinz-Joachim Heise, a Switzerland-based management recruiter who opened an office in Tehran last summer.
accounts.
Companies that haven't done business in Iran are not "knocking on my door wanting to open business here," Heise said.
Iran represents enormous potential to investors. It boasts an educated population of 81 million, comparable to Germany's, that is hungry for Western products. Its natural gas reserves rank second in the world, and its oil reserves rank fourth. Yet production in the energy sector, mining and manufacturing is far from fully developed.
Even so, most foreign companies are holding off on new operations, say several investment advisers to Western companies in Tehran.
Their caution is fueled by uncertainty that a deal to curb
There's also apprehension about the
Corruption, red tape and "legal ambiguity about ownership of companies" will remain, said Bijan Khajehpour of Atieh International, a consulting firm in Vienna that focuses on Iran.
"Even if all sanctions are lifted, there will still be blacklists of Iranian companies that Western companies should avoid," Khajehpour said. "Assets in the economy controlled by the semi-state organizations are gradually approaching the size of government."
The Iranian government "has a huge presence in the market," said Amir-Ali Amiri, founding partner of the Tehran-based investment firm ACL. "Quasi-government entities could cause legal tangles for a lot of (Western) companies" because the United States will continue to ban goods that could be used for military purposes.
That would impact sellers of trucks, copiers and computer printers — all sectors Amiri's companies represent — and even steel producers, whose railroad tracks might be used to deliver goods to a military facility.
Another problem: Western companies left Iran without delivering spare parts for machinery they sold before tighter sanctions were imposed in 2012, Heise said. "Iranian businesses will demand damage payments for machines that broke because they had no spare parts," and Iranian courts will probably back such claims, he said.
Andreas Schweitzer, managing partner at Swiss-Iranian investment firm Arjan Capital, has seen a lot of French, Spanish, German and Italian companies sending lawyers and accountants to learn how to remain in compliance with European and American legal requirements once doing business in Iran is permitted.
"The ramp-up period is not trivial," said Schweitzer, who started out in Iran in 2009 by developing wind farms and helps foreign investors do business there.
His clients are a handful of midsize companies, including one that sold a $15 million waste-to-energy plant to Iran, and companies selling digital gas meters. Schweitzer offers advice on Iranian negotiating culture.
"A signed contract for me is an expression of goodwill, but this is not the end of the negotiations," he said. "The Iranians love post-contract negotiations. Beside the deal, we all leave, and then they say, 'Oh, by the way, let's talk about this,' and we start all over again."
There are also political risks. Khajehpour's company was based in Tehran until he was arrested during the Iranian government's crackdown on a pro-democracy movement after elections in 2009. Khajehpour said he faced charges similar to those leveled against
"I was too close to foreign diplomats and foreign businesspeople in Iran," Khajehpour said. "I still have a legal problem." He was allowed to leave but cannot go back. Companies with Iranian or dual-citizen employees could risk similar situations at times of strife, he said.
Khajehpour said he believes developing Iran's economy will lead to greater peace, political reform and moderation by its revolutionary government. "We live in a region where there's a lot of potential for conflict and misunderstanding and confrontation," he said. "The only thing that will reduce the tension and push the region to greater understanding is economic interaction and greater interdependence."
Some U.S. advocacy groups, such as
He worries the government will use its economic wealth to subsidize foreign militant groups and continue suppressing freedom at home. "If we can get guarantees they won't use additional funds to fund