Iran is open for foreign business (as discussed here). Sounds interesting, but, since this is not much of a philosophical issue to ponder on, practical ways of how-to actually do business with Iran are useful to have on your (strategy-) table.
That’s not something overtly practical, but it is the backbone of every type of relationship, yes, even of business relationships. Iranians come from several ethnic groups, and each of these groups has its own particularities. For most Iranians, though, culture and religion have an important place in their everyday life. Moreover, Iranians are highly influenced by literature, philosophy and poetry. They also feel a general nostalgia towards the Great Persia, and, finally, timing is rarely something of a priority for them.
Politic(s)hould scare you or not?
US sanctions seem to remain a threat for non-US people with US exposure. Most US companies are still excluded from dealing with Iran, but the market is opening up for European and Asian firms. Given the rather unpredictable –as of now– nature of the Tramp Administration, planning with certainty might be difficult to be guaranteed. Nevertheless, the general European feel is that it is very unlikely for a snapback to happen. What might be more helpful is to understand what the Iranian government prioritises, in order to better adjust business practices.
“It is very unlikely for a snapback to happen.”
Study your lesson
Entering any foreign market requires preparation. The more ‘foreign-ish’ the market, the more the homework that needs to be done. Starting with the basics, these two abbreviated fellows seem to be the most important points to consider: KYC and TDD; Know Your Customer & Transaction Due Diligence. With regards to transaction due diligence, what is included is checking that there is no industry risk, no dual use (commercial and military), and it needs to adhere to the rule that no more than 10% of the content comes from the U.S. Nevertheless, what is probably most important is that the due diligence is documented, in case that a check takes place.
“The most important points to consider: KYC and TDD; Know Your Customer & Transaction Due Diligence.”
The Big Bank Theory
There is no doubt that, in order for the market entry into Iran to be successful, a solid banking strategy needs to be in place. Currently, not all banks are open to do business with Iran. The ones that are more willing to take that step are banks with little or no US exposure. In the words of Kees Lakerveld: “you need to be either an existing client of the bank, or commercially interesting enough for a bank to be willing to take what they perceive as high risks of doing business with Iran”.
Law & Order
The overall legal framework needs to be carefully looked at by foreign investors wishing to get involved in domestic business. Arguably, contract negotiation in Iran requires a lot of patience. Some tips:
- Keep contracts short
- Focus on debt and equity only (not many people in Iran are familiar with warrants)
- Take a team approach in negotiations
- Arbitration clauses are enforceable through the Iranian Courts, expect to have to explain every clause including the general clauses that are standard in international business agreements
- Sign agreements outside of Iran
- Agreements in English are accepted.”
Learn all about investing in commodities in Iran; register for the Iran Commodity Trading Forum 2017 taking place on 24-26 October 2017 in Geneva, Switzerland.