x Abu Dhabi, UAESaturday 20 January 2018

Small window for regional companies to profit from easing of Iran sanctions

Experts had hoped to return to normal sooner and avoid affecting more companies.

Daniel Waltz, a partner at the international law firm Patton Boggs, discusses the opportunities the six-month easing of sanctions on Iran could provide for regional companies. Mona Al Marzooqi / The National
Daniel Waltz, a partner at the international law firm Patton Boggs, discusses the opportunities the six-month easing of sanctions on Iran could provide for regional companies. Mona Al Marzooqi / The National

ABU DHABI // The easing of US sanctions against Iran does not offer much opportunity for regional companies, experts said on Monday.

With only a six-month window of opportunity for companies that wish to work with Iran, the experts said the US might review its decision as it would be difficult to complete a deal in that time.

Although some sectors were considered exempt from the sanctions, experts said they hoped for a return to normalcy to avoid affecting more companies.

“Market opportunities for UAE-based companies as a result of the P5+1 interim agreement with Iran are limited,” William Nash, managing partner of US law firm Patton Boggs, said in Abu Dhabi.

“Although there is a real possibility of more significant changes to the Iranian sanctions regime over time, there is no guarantee that the ongoing negotiations will be successful and result in material new opportunities.”

Mr Nash was at the Global Defence Marketing Forum, which focused on providing practical insight into the easing of sanctions against Iran and what it could mean for the defence, space and security businesses in the region.

“The recent P5+1 interim agreement really does not open much in the way of opportunities in the defence and space industries,” said Daniel Waltz, a partner at Patton Boggs.

“The situation depends on the progress of these negotiations. It would be very optimistic to expect the negotiation of a comprehensive agreement before the end of the six month-period”.

Last November, US secretary of state John Kerry said the UAE had paid a great price for sanctions on Iran, with a US$19 billion (Dh69.79bn) loss of business.

“If they’re making good progress, it would be foolish to walk away,” Mr Waltz said. “And you could imagine a second six-month interim agreement if they continue to negotiate towards a comprehensive agreement.

“Six months isn’t a lot of time [to complete operations] and I think the US may revisit the six month-window for insurance companies at least.

“The US, thus far, has adopted a very hard line which limits the commercial value of the small relaxation that exists even further.”

Although US “secondary sanctions” target Iran, he said they did so by threatening the imposition of sanctions against third-country companies that engaged in specified categories of transactions.

“These include companies in Abu Dhabi,” Mr Waltz said. “And it puts them between a rock and a hard place.”

He said laws that added to the list of activities that were under sanctions made it “mind-numbingly detailed and complicated”.

Opportunities for US companies and foreign subsidiaries are now only in aircraft parts and services for civilian aviation.

“This is probably the only area that could benefit companies in the defence industry where there could be some commercial opportunity,” Mr Waltz said.

US companies can also sell food, medicine, medical devices, agricultural products and some IT and technical communications. But they remain limited in some way.

“Because of this horribly increasing complicated set of sanctions targeting foreign institutions, a lot of banks are gun-shy and they don’t want to handle transactions coming out of Iran,” he said. “Iranians are willing to make the payment but no banks can clear the payment to pay the US exporter. So the US has committed to opening banking channels to facilitate this lawful trade.”

For foreign companies, accepted operations with Iran include automotive, precious metals and buying Iranian petrochemicals.

“Some will be allowed to send to Iran proceeds resulting from sales of Iranian crude but all transactions must be initiated and completed within the six-month window and this is a major issue for insurers of transportation of Iranian crude,” Mr Waltz said.

“If you can get a contract to service Iranian aircraft, for instance, execute, perform and get paid within the six-month window, then that’s an opportunity but the clock is ticking.”