Menas Associates’ analysts are often consulted by the press for their expertise and insight into developments in the regions we cover.  The following article was first published by the FT’s FDI Intelligence magazine after consultation with our Middle East & North Africa manager, Nicholas Wade. For any press enquiries please feel free to get in touch. 

Iran welcomed its first wave of international business deals as the lifting of numerous economic sanctions took effect on January 16. Iranian president Hassan Rouhani told press that so far 150 companies from 50 countries have visited Iran for investment discussions.

Already, Iran has signed a $10bn deal with French manufacturer Airbus to buy 114 new aeroplanes, as well as a memorandum of understanding with German carmaker Daimler, which will return to Iran after a six-year hiatus.

The first major international law firm to enter Iran, CMS Legal, has opened its offices in Tehran in the Navak Tower, which is also home to the German Chamber of Foreign Trade.

“This will enable us to provide local support for our clients and investors on projects in Iran,” said Hubertus Kolster, managing partner of CMS Germany.

CMS has already advised on the co-operation agreement signed between Daimler and local vehicle manufacturer Iran Khodro Diesel SSA, the firm reported.

Germany, France and Italy lead the way as the EU looks to more than treble trade with Iran from the current $8.3bn to the pre-sanctions level of roughly $31bn.

Major sectors of interest for FDI in Iran include transport, logistics, construction and pharmaceuticals. Iran’s banks have also reconnected to Europe’s financial system.

Tehran plans to increase its oil exports to 500,000 barrels a day – from about 280,000 a day in 2015 – with a particular focus on India.

The World Bank has projected gross domestic product growth of 5.8% in 2016, and increased natural gas production plus the release of Iran’s frozen assets – estimated to be between $50bn and $100bn – are expected to transform the economy.

Nonetheless, analysts expect it may take decades before the benefits are felt by ordinary Iranians. Mr Rouhani is seeking up to $50bn in foreign investment per year.

Estimates put the country’s infrastructure investment needs at up to $1000bn.

While multinationals home in on opportunities to expand into the Middle East’s second-largest market by population, experts advise the country is still very risky despite potential high returns.

Corruption is endemic: Iran ranks 136th out of 175 countries in Transparency International’s Corruption Perception Index.

“Corruption, financing risks and the need for due diligence are going to be especially relevant in the context of FDI in Iran,” said Nicholas Wade, Middle East and North Africa programme director at London-based consultancy Menas Associates. “International companies don’t want to fall foul of any US sanctions, they will struggle to get credit and much of the ownership structure within the Iranian economy presents the risk of dealing with sanctionable entities, such as the Revolutionary Guard Corps [a branch of the military].”

US sanctions relating to human rights abuses and support for terrorism remain in place, including those on doing business with entities linked to the Revolutionary Guard.

Companies will therefore need to be very careful about choosing local partners.

– Natasha Turak