In a recent interview with the IRNA, Norman Lamont, the trade envoy between Britain and Iran, expressed a desire that the U.K. and Iran do more to “have a better understanding of each other by increasing trade and talks”.
The statement comes in a time of uncertainty for trade relations with Iran; Trump’s presidency has left banks cautious of lending against trades and the U.S. has recently agreed sanctions as part of the ‘Countering Iran’s Destabilising Activities Act’.
However, Lamont was bullish that these sanctions must not damage ties between Iran and Europe. Major companies have already cut a path since the nuclear deal was signed in January 2016, with Airbus being one of the first to start exporting to Iran. Trade between the two countries is increasing and Lamont feels many more opportunities exist for U.K. SMEs looking to trade with Iran.
The indicators for a potential emerging market are strong. Iran has a young and educated population – 60% of the 80 million are under 30 and over 70% live in cities. Nearly 40 years of strict sanctions have created a gap in the market for consumer goods and electronics and it was little surprise to companies in this industry being some of the first to move in once sanctions were lifted.
Other sectors Iran is keen to establish trade links with include manufacturing and aerospace – both areas where the U.K. remains strong. Tourism is also another key area for growth, with many expecting a boom in coming years due to Iran’s statues as a top 10 UNESCO Heritage site.
Two major challenges face U.K. businesses looking to trade with Iran. The first is compliance with legal frameworks; the majority of the major companies are owned by the Iranian State and the high levels of bureaucracy can prove time-consuming for first time exporters. Companies must also be certain they are complying with the regulations of all existing U.S. sanctions. No parts of any products, for example, can be made in the United States.
The second challenge, as Lamont highlights in his interview, has always been finance. Banks are unwilling to offer trade finance against countries still considered a risk. However, structuring trade deals between Iran and the U.K. is now possible without relying on banks for trade finance, and companies looking to be first movers in this emerging market have started to take advantage of this.
For companies looking to broaden their trade horizons in preparation for a post-Brexit economy, Iran may prove an attractive and lucrative new market.
For assistance in structuring trade deals to emerging markets contact Jardine Norton.