The vast array of opportunities that the Iranian markets offer, for the international business, are almost inconceivable in any other country in the Middle East region.

1. Introduction

Iran has been under strict economic sanctions imposed by the EU as well as the international community, which prohibit wide range of business activities. However, based on the historic agreement that was reached in July 2015, in between Iran and the world powers, the EU economic sanctions are expected to be lifted in the near future, allowing for free trade between EU and Iran. The implementation of the Agreement already includes the temporary suspension of a limited number of EU-sanctions for a period of six months at the time, currently until January 2016.

Currently, EU-Iran trade is not freely permissible. Trade with many products and services is subject to prior authorization or at least notification of the competent authorities in the Member States. Moreover, international banks are the most cautious business sector when dealing with Iran; most of international banks have implemented policies, which per se are more restrictive than the actual sanctions regime would require. To avoid any complications, checking the permissibility of any contemplated transaction and any related payments thereto. Furthermore, under the current EU legislation, any deal with Iran has to be executed within a limited time frame. Therefore, planning of any business deal is normally essential, but with Iran is even crucial.

2. The Deal and the EU Long Awaited Sanctions Relief

On July 14, 2015 Iran and the P5+1 Countries (China, France, Russia, USA and the UK plus Germany) and the European Union have reached a historic agreement on Iran’s nuclear program (hereinafter the “Deal”). The Deal seeks that Iran’s nuclear program will be for exclusively peaceful purposes. In return, the Deal will produce the comprehensive lifting of all crippling sanctions.

As foreseen, on October 18, 2015, the EU adopted the legislative framework for lifting all of its nuclear-related economic and financial sanctions. For now, the legal act is only for the EU to prepare for the lifting of the sanctions; this implies that sanctions are not yet lifted. The ultimate lifting of the sanctions, however, will not take effect until the Implementation Day, which will occur when the International Atomic Energy Agency verifies that Iran has fulfilled its obligations as set out in the Deal (the Implementation Day is a date unknown at this stage, but it may take place during the course of the next year). Upon such successful fulfilment of Iran’s obligations, the EU and its Member States will terminate all nuclear-related economic and financial sanctions.As a result of the ultimate lifting of the EU sanctions, the following activities and their related services, which are currently restricted or prohibited, will be freely allowed:

  • Financial, Insurance and Banking
    • Transfers of funds between EU persons, and Iranian persons, including EU and Iranian financial and credit institutions, without the requirement for authorization or notification;
    • Opening by EU persons, including EU financial and credit institutions, of representative offices, subsidiaries, joint ventures or bank accounts in Iran;
    • Provision of insurance or reinsurance;
    • Supply of specialized financial messaging services to any Iranian natural or legal persons;
    • Entering into commitments by EU Member States to provide financial support for trade with Iran, including the granting of export credits, guarantees or insurance.
  • Oil, Gas and Petrochemical Sectors
    • Import, purchase, swap or transport of Iranian crude oil and petroleum products, natural gas or petrochemical products and related financing;
    • Sale, supply, transfer or export of equipment or technology, technical assistance, used in the sectors of the oil, gas and petrochemical industries;
    • Granting of any financial loan or credit to, the acquisition or extension of a participation in, and the creation of any joint venture with, any Iranian person that is engaged in the oil, gas and petrochemical sectors in Iran or outside Iran.
  • Shipping, Shipbuilding and Transport Sectors
    • Sale, supply, transfer or export of naval equipment and technology for ship building, maintenance or refit, to Iran or to any Iranian persons engaged in this sector;
    • Provision of vessels designed or used for the transport or storage of oil and petrochemical products to Iranian persons, entities or bodies;
    • Provision of bunkering or ship supply services, or any other servicing of vessels, to Iranian-owned or Iranian-contracted vessels not carrying prohibited items.
  • Gold and other precious metals
    • Sale, supply, purchase, export, transfer or transport of gold and precious metals as well as diamonds, and provision of related brokering, financing and security services, to, from or for the Government of Iran, its public bodies, corporations and agencies, or the Central Bank of Iran.
  • Metals
    • Sale, supply, transfer or export of graphite and raw or semi-finished metals, such as aluminum and steel to any Iranian person, entity or body or for use in Iran.
  • Software
    • Sale, supply, transfer or export of software for integrating industrial processes, including updates, to any Iranian person, entity or body, or for use in Iran.

As a consequence of these developments, if Iran fulfils its obligations under the Deal, all of the aforementioned business sectors will benefit from the sanctions relief commencing on the Implementation Day. This would obviously have a positive impact on the Iranian economy. In return, it would pave the way for substantial access to the Iranian markets for the international investors, creating significant opportunities for international trade and growth.

3. The Current EU Suspended Sanctions and the permissible trade

As said above, the economic sanctions are yet to be lifted, and consequently trade with Iran is yet to be freely permissible. However, until the Implementation Day is reached, the EU continues to suspend certain sanctions against Iran. The suspension of these sanctions was principally agreed upon the Joint Plan of Action with Iran, which was reached on 24 November 2013. As it was agreed, the suspension is for a period of six months, renewable by mutual consent of the parties. The suspension of the sanctions had started already in January 2014, and it has been extended for several times. Particularly, following the Deal that was reached on 14 July, 2015 in Vienna on the Iranian nuclear program, the EU has recently extended the suspension of the EU sanctions until 14 January 2016.

Currently, based on the EU suspended sanctions, the following business activities are allowed:

  • The provision of insurance and reinsurance and transport of Iranian crude oil, (it is worth mentioning that import or purchase of Iranian crude oil and petroleum products is currently prohibited, and only the transportations is allowed to any given destination outside the EU)
  • The import, purchase or transport of Iranian petrochemical products,
  • The trade in gold and precious metals.

To be on the safe side, as the sanctions are still in place, any contracts with regards to the above mentioned activities would have to be executed before the 14 January, 2016, unless the sanctions are lifted by then or the parties decide to extend the suspension of the sanctions for another period.

The EU regulations also set out restrictions on transfer of funds and on financial services to and from an Iranian person. Therefore, it is essential to check out whether a letter of credit or bank guarantee can be obtained. However, there are different procedures regarding transfers of funds, as follows:

1. When transfers of funds involve Iranian Bank or Iranian financial institutions:

  1. No prior authorization is required, but the transfer shall be notified in advance in writing to the competent authority in the Member State concerned, if equal to or above EUR 10 000 or equivalent, in the following cases:
  • transfers due on transactions regarding foodstuffs, healthcare, medical equipment, or for agricultural or humanitarian purposes, below EUR 1 000 000 or equivalent,
  • transfers due on transactions regarding personal remittances, below EUR 400 000 or equivalent.
  1. Prior authorization of the competent authority is required in the Member State concerned, in the following cases:
  • transfers due on transactions regarding foodstuffs, healthcare, medical equipment, or for agricultural or humanitarian purposes, equal to or above EUR 1000 000,
  • transfers due on transactions regarding personal remittances, equal to or above EUR 400 000 or equivalent,
  • any other transfer equal to or above EUR 100 000.

2. When transfers of funds do not involve Iranian banks, the transfers shall be processed as follows:

  1. No prior authorization is required, but the transfer shall be notified in advance in writing to the competent authority in the Member State concerned, if equal to or above EUR 10 000 or equivalent, in the following cases:
  • transfers due on transactions regarding foodstuffs, healthcare, medical equipment, or for agricultural or humanitarian purposes,
  • any other transfer below EUR 400 000 or equivalent.
  1. Prior authorization is required of the competent authority in the Member State concerned, in the case of any other transfer equal to or above EUR 400 000.

4. Concluding Remarks

As stated above, based on the Deal, the EU economic sanctions on Iran are to be lifted, but only after Iran has fulfilled its obligations and commitments. In other words, the sanctions are still in place, and the Deal contains lengthy and detailed procedures, which might take up to the mid of 2016 to be fulfilled or even longer.

Dealing with Iran or Iranian entities, however, is currently allowed under the EU regulations in relation to certain products and services. Any business deal with Iran requires confident planning, and extreme caution must be used when entering any transaction. Additionally, any contracts with regards to the permissible business activities would have to be executed before the 14 January, 2016, unless the sanctions are lifted by then or the parties decide to extend the suspension of the sanctions for another period.