A Nuclear Compromise Raises Hopes but Uncertainty Lingers

July 8, 2015

After years of negotiations there is a possibility that by the end of this week the P5+1 could reach a comprehensive nuclear agreement with Iran. While the US and its allies had imposed a variety of tough sanctions since 1979, the strongest measures were taken in the last decade in response to Iran’s continued illicit nuclear activities. These included wide ranging restrictions relating to its nuclear, missile, energy, shipping, transportation, and financial sectors.  If a deal is reached by July 10^th and select sanctions are lifted, a key question remains: if companies start doing business with Iran, how might their risk exposure be effected if Tehran subsequently runs afoul of the terms of the agreement? Pursuing business opportunities in Iran may seem lucrative, but in the midst of so much uncertainty the risks may outweigh the rewards. “Businesses have become terrified about doing business with Iran, and it’s not easy to un-terrify them,” the president of the National Iranian American Council, Trita Parsi, told Bloomberg.

The Persian Opportunity

Despite the pariah status Iran has earned over the last 35 years, many multinational corporations are keen to find an opening. With a population exceeding 80 million, in addition to being the second largest economy (GDP of $406 billion in 2014) in the Middle East and North Africa (MENA) after Saudi Arabia, Iran offers lucrative business opportunities in the financial, transportation, services, and hydrocarbon sectors. European financial institutions, which despite having been fined substantial sums for Iranian money laundering and sanction breaches, recently returned to Tehran. According to sanctions licenses issued by the US Department of Treasury, in the first three months of 2014, BNP Paribas Group, HSBC Holdings, Societe Generale SA and Standard Chartered Bank had been given waivers to conduct transaction and wire transfer operations.

What next?

With the details of an agreement still guarded, only after the two sides meet the July 7 deadline will it be available for the US Congress to review. However, if no deal is reached before July 9, Congress would have an additional 30 days to look over the accord. The UN Security Council would also have to endorse a final deal, with a new resolution which may create two mechanisms to implement the agreement. One of them would be a dispute-resolution panel, to include Iran and P5+1 to address suspected breaches by Tehran. For companies considering doing business in the Central Asian nation, the only certainty for the near future is uncertainty.

By Chris Stubbert, Analyst

Chris leads all research assignments for Integro Advisers with a focus on special due diligence and background investigations.