Doing Business in Iran Panel Event

Under the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 (China, France, Russia, the UK, the US, and Germany), the United Nations has begun to lift certain sanctions on Iran imposed by the international community, in exchange for greater transparency and concessions on Iran´s nuclear program. The removal of the first set of U.N. sanctions against Iran on January 16, 2016 freed up tens of billions of dollars that had been frozen in international banks, and foreign companies have already announced their intent to enter the Iranian market.

With a shared history of trade and culture stretching back over a millennium, Turkish business and legal experts are uniquely positioned to guide investment and business ventures into the post-sanctions market. With that in mind, a group of partners from Hergüner Bilgen Özeke traveled to Iran in September 2015 to investigate opportunities made possible by the removal of sanctions. They had the privilege of sharing and discussing their observations with Turkish and Iranian academics, business people, and legal experts during a “Doing Business in Iran” panel event, hosted at the Hergüner office in Istanbul on November 11, 2015. These experts offered unique insights into the current and future state of cross-border business in post-sanctions Iran.

Ümit Hergüner, our senior partner, opened the day’s discussions with an overview of the current state of Turkish-Iranian relations, including his observations from the partner visit to Iran in September. Mr. Hergüner noted the strong cultural similarities between Turkish and Iranian society, remarking that the two neighbors have maintained a peaceful coexistence for over two centuries. This peaceful coexistence has produced strong economic ties. The average trade volume between the two countries is approximately 14 million USD annually, and Turkish Airlines flies to seven Iranian destinations from Istanbul. Trade with Turkey will help to satisfy the immediate Iranian demand for consumer goods. Mr. Hergüner concluded by predicting that Turkish businesses through their experience will serve as a bridge for investment in Iran.

The first panel featured a discussion on the opportunities and risks posed by the removal of sanctions on Iran. Sinan Ülgen, managing partner of the Istanbul Economics Consultancy, presented on the geopolitical situation of the current Iran negotiations. Mr. Ülgen explained that the U.N. nuclear sanctions are being removed first, and that unilateral U.S. sanctions with a third-party impact will only be lifted later, assuming that Iran continues to fulfill its obligations under the Joint Plan of Action. He identified snap back, or the reimplementation of sanctions, as the greatest potential risk if Iran violates these obligations. Our second guest panelist, Kasım Han of Kadır Has University, presented on Turkish-Iranian relations and the economic ties between the two countries. Mr. Han noted that the biggest risk will be to small foreign businesses attempting to enter the Iranian market alone to work on big-ticket projects without experience or trusted partners. He predicted that Turkey, due to both proximity and economic relations, will serve as a gateway country for post-sanction trade and investment in Iran. Foreign investors may therefore rely on Turkish experience when entering the Iranian market.

The second panel featured a discussion on business and economic challenges in Iran. Masood Janeh, managing director of Taureau Capital, said that “action-oriented” businesses will benefit from entry into the Iranian market, despite the limited lending abilities of Iranian banks. He noted that Turkish businesses may have a comparative advantage establishing themselves in Iran due to Turkey´s own experience as a transitioning economy. Our next speaker, Agahjobs CEO Mehrdad Agah, remarked on several features of Iran´s investment environment, including Iran´s potential to be a manufacturing hub. He noted that the retail and tourism sectors may quickly benefit from the removal of sanctions. Funtime CEO Doğan Bürkev then provided a firsthand account of his experiences in Iran, identifying the growth potential in the retail industry, but warned against rushing into Iran without an understanding of the market risks.

Finally, Farid Kani, a senior associate attorney at Atieh Associates Law Firm in Tehran, gave an excellent overview presentation on the major legal requirements of doing business in Iran. He noted that a bilateral investment treaty between Turkey and Iran has been in force since 2005, allowing Turkish investors access to investor-state arbitration. Mr. Kani recommended that prospective investors conduct a detailed due diligence process of Iran´s legal and investment regime before investing in the country. Proper due diligence, and a local presence, will be essential to both comply with sanctions and gain the confidence of Iranian business partners.

With such a large turnout, the panelists did an excellent job of offering insightful and thought-provoking answers to challenging audience questions. As the sanctions are removed, an increase in business between Iran and Turkey is inevitable. Iranian businesses will rely on trusted foreign partners as the economy opens for foreign investment. Turkey is well-positioned to be the bridge for investment in Iran in the post-sanctions era. Hergüner Bilgen Özeke is enthusiastic for the business and investment opportunities made possible by the removal of sanctions on Iran.