As reported in our update of 17 January 2016, the lifting of EU sanctions following Implementation Day is expected to trigger a substantial increase in trade between western companies and their Iranian counterparts.
In a move which demonstrates the enthusiasm for improved trade relations between the UK and Iran, on 20 January 2016, the UK government appointed Lord Lamont, the chairman of the British Iranian Chamber of Commerce, as the Prime Minister's Trade Envoy for Iran. On the announcement of his appointment, Lord Lamont said "this is an exciting time in deepening the economic relations between the two countries….there are huge opportunities in commerce and trade for both countries." This sentiment is echoed by the government's new official guidance on trade with Iran which states "there is a positive outlook for UK-Iran trade relations and the UK Government fully supports expanding our trade relationship with Iran".
While much of the focus in recent months has been on the impact that the lifting of sanctions will have on the oil and gas sector, the impact will be no less significant in other sectors including agriculture, pharmaceuticals and metals. In fact, these industries may feel the benefit of the lifting of sanctions more quickly because of the relative development of the necessary infrastructure in Iran and a strong desire by Iran to diversity its economy.
The UK government has said that it expects EU trade with Iran to quadruple, from its current level of $8billion, in the next 2 years. UK Export Finance is now supporting UK business that wish to export to Iran which should provide comfort and practical assistance. As of 18 January 2015, UKEF noted that it had already "identified potential opportunities in a number of sectors, including oil and gas, infrastructure and machinery."
There remain practical hurdles to any trade deals with Iranian counterparts. Due diligence is a key issue and is vital to any trade deals with Iranian counterparts, as while the vast majority of the EU sanctions have been lifted, asset freezes remain in place for certain entities/persons, including the Iranian Revolutionary Guard which has widespread commercial interests. Companies need to make sure that any trade deals will not, directly or indirectly, benefit any designated person. In addition, parts of the banking sector, at least, are expected to take some time to be in a position to facilitate such transactions.
It will take time for Iran and the UK, and Iranian and UK companies, to rebuild relations and trust following years of sanctions and trade embargos and care must be taken when entering into trade deals with Iran to ensure compliance with the remaining sanctions and broader regulatory issues (including anti-bribery and corruption), however, undoubtedly the lifting of sanctions on Implementation Day presents many opportunities for trade with Iran.