Iran: Open for Business
Dec. 16, 2015
On this edition of The Focus we look at Iran, where officials are trying to drum up business as it becomes clear that sanctions against the country could soon be lifted.
On Tuesday, The International Atomic Energy Agency, or IAEA, ended its investigation into Iran's suspected nuclear weapons program. It was a big step toward the lifting economic sanctions, something that could happen as early as next month.
Iran's relations with the West have been strained for decades. In 2006, the UN Security Council imposed its first sanctions again the country and has been gradually strengthening them ever since. That forced the departure of many businesses from other countries, including Japan.
The country's nuclear program remained an issue, but this July, six major powers reached a landmark deal with Iran. Now officials in the country are hoping its 78 million people and abundant natural resources will help them attract needed expertise from overseas as they prepare to reopen for business.
Recently, a six-member delegation from Iran's oil industry visited Japan to meet with officials from Japan's oil industry organization, the JCCP. They included executives from Iran's state-run oil company and an official from the Petroleum Ministry, who came to Japan to discuss what kind of training is needed in Iran's oil industry.
Since 1981, Iran has sent more than 1,400 engineers and businesspeople to the organization. They've come to learn about Japanese-style management as well as the latest technology. The program was suspended in 2010, amid tightening sanctions.
National Iranian Oil Refining & Distribution Director Saeid Mahjoubi explains "after the sanctions, cooperation was reduced somewhat. But we are here to reconstruct our activities and enjoy the bilateral benefits for both parties." Another of the visitors expressed eagerness to see the Japanese industry at work at oil refineries.
The organization hopes to restart the program as early as next April, but industry players remain cautious. CEO of Petroleum at the Japan Cooperation Center Tsuyoshi Nakai says "there are considerable restrictions on technology transfer and cooperation. We'll keep an eye on how far the sanctions may be lifted. Iranian firms want a wide range of knowhow from environmental protection, to safety measures and marketing."
The program is one example of the Iranian government's growing efforts to bring in new technology and business management expertise from foreign countries. Last month, the government organized an investment seminar in Tehran which drew businesspeople from more than 400 companies all over the world. They were shown prospective sites in Iran for the development of crude oil and natural gas projects.
The Iranian government is urging foreign businesses to take part in a mega-plan involving 50 development projects. Officials estimate it will require more than $160 billion in investment. Iranian Oil Minister Bijan Zanganeh says "We hope foreign companies will join this project. Iran needs new technology, business skills and investment from abroad."
NHK World's Kentaro Shinagawa joined Sho Beppu and Aki Shibuya live from Tehran.
Beppu: That investment seminar seems to underscore the government's resolve to boost the economy. What's behind this push? Why's it happening now?
Shinagawa: Iran's oil exports have fallen by about half since it was slapped with sanctions. And the government wants to fix that as soon as sanctions are lifted. Crude prices are falling, but Iran's petroleum minister Bijan Zanganeh doesn't seem concerned. He has confidence Iran can export more oil to maintain revenue levels.
Beppu: Does Iran view Asia and Japan as important foreign markets?
Shinagawa: The minister says regaining market share in Asia will be a top priority. The government is pinning high hopes on Japan, which has been a major importer of Iranian oil. In fact, people used to say Iran's oil helped Japan's economy grow sharply in the decades after World War II. If sanctions are indeed lifted, officials in Tehran will likely encourage Japan to import more of its oil.
Beppu: How are foreign companies getting involved, as Iran prepares to reopen for business?
Shinagawa: The private and public sectors in Europe were the first to set their sights on Iran as a promising market. But Asian countries aren't far behind them. Here's a report that gives a glimpse of the intensifying competition among foreign firms.
Iran is one of the most industrialized countries in the Middle East. Most cars on the roads are produced domestically, but economic sanctions have taken their toll over the past few years. So the Iranian government has set a target of tripling domestic auto production to three million units in the next ten years.
European auto-related firms are moving quickly to establish businesses here. A German company recent designed a painting plant for Iran's second largest automaker and the delivered the equipment. The paint is supplied by another German firm. The Iranian company is also in negotiations with French car companies.
The auto industry is heating up. Last month, an international auto parts trade show in Teheran drew representatives from 600 foreign businesses, up over four fold from last year. Chinese companies attracted a lot of attention at the show. They've been making inroads in the Iranian market, in the absence of Japanese and western firms as a result of sanctions.
Recently, representatives from 17 Japanese auto-related companies visited Iran. One of them is Hidenori Furukawa, who represents a leading paint manufacturer. He's eager to sell car paint to Iranian auto makers.
Japanese firms have been planning their entrance into the Iranian market. But Furukawa says firms from other countries are taking risks and competing against one another. He says swift decision-making is indispensable. "I don't think Japanese firms can gain market share by relying solely on the quality of their goods," he says. "We need to take a more aggressive approach."
Beppu: Kentaro, the IAEA has finished its Iran investigation. What has to happen now, for sanctions can be lifted?
Shinagawa: The landmark deal between Iran and 6 countries spells out when sanctions can be lifted: When the IAEA confirms that Iran has completed all of the steps it agreed to. It seems that the day will come soon. Exactly when is unclear, but some observers say it could be early next year.
Shibuya: Is Iran's economy improving at all? And are people there pinning their hopes on the sanctions being lifted?
Shinagawa: The sanctions are still very much being felt. Share prices and the value of Iran's currency, the rial, remains low. The inflation rate still tops 10 percent. There are indeed many citizens who support the agreement. They're waiting for the sanctions to be lifted. Their wishes are wide-ranging. For example, some say they want to eat at a McDonald's. Others hope to own a European car. But what they all share is a desire to see their country forge new relationships abroad, attract more investment and draw more foreigners.
Beppu: Could hardline conservatives still derail the agreement?
Shinagawa: After the deal was signed in July, people in the media who supported moderates or reformists were reportedly summoned or detained by authorities loyal to the hardliners. Some senior government officials are criticizing the move. They say it's aimed at eroding the influence of moderates and reformists. Next February, Iran plans to hold a parliamentary election and an election for the Assembly of Experts, which appoints and supervises the country's leader. Will the hard-liners who hold a majority of seats in the legislature be able to keep their strength? Or will the moderates and reformists make advances, backed by voters who support the landmark deal? Iran will likely see a heated race between the two sides to gain voter support in the run-up to the polls.