Iran investment: companies beware

Investors – the adventurous sort, anyway – may start thinking soon enough about companies with exposure to life after sanctions in Iran. Some relief is due early next year as international negotiations on a nuclear deal kick off: a six-month loosening of trade in petrochemicals and car parts. With Tehran’s Tedpix stock market index up 10 per cent since the relief was announced last month, Iranian investors appear to think it may be the start of something big. What about their foreign counterparts?

Even at this early stage, foreign investors have a few large numbers to frame thinking. Among carmakers, for a long-term gauge, there is the Boston Consulting Group’s forecast of 1.5m new-vehicle sales in Iran by the end of the decade. That would rank it behind only Indonesia and South Korea among non-Bric emerging nations as a market for cars. In the short term, Renault has €200m in local currency trapped in Iranian bank accounts. That would not be unwelcome on the French carmaker’s balance sheet.

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But that is moving from auto sanctions to financial ones, which are not part of the interim deal. The argument against rapid change is usually that the US Congress will not allow it without serious moves from Tehran on the nuclear issue. But companies should beware a less conspicuous Washington institution: the US Treasury’s Office for Foreign Assets Control.

US sanctions on Iran are spread across several laws and regulations. OFAC, at the centre, tends not to explain in advance how it works, not least because uncertainty puts pressure on Iran. Companies are therefore even more cautious. OFAC can also apply strict civil liability to transactions – and few large western companies can avoid the US financial system. Financial sanctions might gradually lift. But until the last moment, the enforcement regime behind them will be formidable. Adventurous indeed.

The Financial Times Ltd.