Iran prepares for huge tourism, business growth after nuke deal
Tehran hopes to attract as many as 20 million visitors a year by 2025, stands to net up to $30 billion; Germany, France, Spain to send trade delegations
Iran’s tourism and business industries are gearing up for rapid growth following the lifting of economic sanctions on Iran, as part of a new nuclear deal signed Tuesday in Vienna.
Several Western hotel chains and tour operators are making initial inquiries in Iran, according to a report in the Daily Mail, and local providers are preparing for a new wave of tourists.
According to a report in the Guardian, Iran saw a spike in tourism after the 2013 election of the relatively moderate president, Hassan Rouhani, whose government subsequently took steps to ease visa requirements for visitors and build some 200 new hotels to accommodate tourists. Eleven of them were built in 2015 alone, according to an Iranian tourism official who spoke to CBS.
“No other industry in Iran will see a bigger boost than tourism as the result of this deal,” said Iran’s vice-president for tourism, Masoud Soltanifar, after the nuclear deal was announced. “The news about the nuclear agreement and lifting of economic sanctions has delighted our tourism industry.”
Soltanifar said he hoped the country could attract as many as 20 million visitors a year by 2025, and net up to $30 billion from the tourism industry.
“Iran has a wealth of attractions — ancient cities like Persepolis and Pasargadae built by famous leaders like Cyrus the Great, and Darius, stunning Islamic art and architecture, reaching its zenith in Esfahan,” David McGuinness, co-founder of specialist tour operator Travel The Unknown, said.
“The country is supremely friendly and welcoming, despite what our preconceptions may lead us to believe,” he went on.
Iran bars Israelis and those with Israeli stamps in their passport from entering the country.
“Now the path forward to a normalization of relations, while certainly not assured, is beginning to emerge into the light — and with this a rebirth of tourism in Iran,” he concluded.
Iran has 19 UNESCO world heritage sites, beaches, mountains, marketplaces, and boasts a rich cuisine.
Meanwhile, business and political leaders are wasting no time in trying to tap into a large and what they hope will be a lucrative Iranian market.
Germany is dispatching a large trade delegation to Tehran on Sunday, including members of industry giants like Linde, Siemens, Mercedes-Daimler and Volkswagen. Spain has a similar trip planned, and France’s top diplomat is eyeing a visit too. Ads for European cars and luxury goods are starting to reappear in Tehran. Airlines in Dubai are fast adding new Iran routes to meet growing demand.
American firms, though, will have to be much more cautious. Deal or no deal, US sanctions not related to the nuclear program will still be in place and bar most American companies from doing business with Iran.
That means they stand to lose out to European and Asian companies — some that still have business contacts in the country before sanctions were tightened in recent years.
“It’s easier to say who is at a disadvantage. And that will be US firms,” said Torbjorn Soltvedt, principal Mideast analyst at risk advisory company Verisk Maplecroft.
On paper, Iran holds plenty of promise. Two and a half times the size of Texas, it is home to some 80 million people, sits atop the world’s fourth-largest oil reserves and the second-biggest stores of natural gas, and has well-established manufacturing and agricultural industries contributing to a $400 billion economy.
London-based Capital Economics estimates the economy could surge ahead by 6-8 percent annually over the next several years as sanctions ease.
“Everything is in place for economic growth,” said Dominic Bokor-Ingram, portfolio adviser at British asset management firm Charlemagne Capital. His company earlier this year announced a plan to launch Iranian investment funds in partnership with an Iranian company.
“Iran has infrastructure, it has the institutions, it has the education,” he added. “It has a lot of highly educated people who will go back to Iran if sanctions are lifted.”
Tapping the market won’t be easy.
The elite Revolutionary Guard is deeply involved in the economy and corruption is such a problem that Rouhani lamented late last year that once-secret bribes are now being handed out openly. Iran ranks only 130 out of 189 economies on the World Bank’s ease-of-doing-business list.
Assuming the deal goes ahead as planned it will still take at least several months until nuclear-related sanctions are lifted. And those sanctions can be slapped back on if Iran fails to live up to its end of the bargain, according to the deal
That means many multinationals are unlikely to commit to big investments in the immediate future, though the staggered sanctions relief also gives companies time to gear up their operations, analysts say.
The oil industry is one area where Iran could use outside investment. Fitch Ratings expects it will take years for Iran to get back to the roughly 2.5 million barrels a day it was exporting before 2012, because investment in the sector has been limited under sanctions.
Chevron Corp. spokesman Kurt Glaubitz said the company is reviewing the nuclear deal to understand its implications, but for now it remains “in strict compliance” with US and international laws. Exxon Mobil Corp. declined to comment.
Another area ripe for deal-making is Iran’s creaking aviation industry. Sanctions have made it impossible for Iran to buy new Western-made planes and difficult to acquire spare parts for the planes it does operate.
An earlier interim nuclear agreement gave Boeing Co. and engine-maker General Electric Co. the green light to provide some spare parts for US-made planes in service in Iran since the 1970s. Boeing says it has only sold one spare part along with some service bulletins and other materials since that deal came into force last year.
The latest agreement allows for licenses on the sale of commercial aircraft, and Transportation Minister Abbas Akhoundi has said his country is prepared to spend about $20 billion to purchase some 400 aircraft over the coming decade.
Boeing’s Mideast communications head, Fakher Daghestani, said the company is reviewing the deal “but until the US government gives us further direction, it would be premature to comment.”
GE, which also has US licenses to sell some medical equipment in Iran, said it looks forward “to reviewing the details of the agreement and will watch the regulatory landscape that may unfold.”
While the Americans voice caution, Europeans are wasting little time wooing Iran.
Although planned some time ago, Germany’s three-day trip led by Economy Minister Sigmar Gabriel comes less than a week after the nuclear accord was reached.
Spanish Industry Minister Jose Manuel Soria said he will be joined on a September trip by Spain’s foreign and development ministers, and he expects good prospects for Spanish companies in industry, energy, telecommunications, tourism and infrastructure.
French Foreign Minister Laurent Fabius said Wednesday he would be paying a visit to Iran as France looks to explore business opportunities, though he made a point of saying commercial interests were not what drove the deal. A large French business delegation, anticipating a resolution to the nuclear issue, traveled to Tehran last year, rankling US officials.
Switzerland dispatched a business delegation to Iran at the end of April, soon after Iran and world powers reached a framework deal that paved the way for this week’s agreement.
“There is pent-up enthusiasm to do something,” said Martin Johnston, director-general of the British Iranian Chamber of Commerce, a network of politicians and business leaders that hope to promote trade. He said he expected businesses would go to Tehran to examine the opportunities for the time being.
“They are waiting for the structures to be in place to be able to trade, not only the legal arrangements but the suitable banking arrangements,” he said.
Airlines across the Persian Gulf from Iran are ramping up operations as interest grows.
Discount carrier FlyDubai launched a major expansion to Iranian destinations from its base in the Mideast’s busiest airport of Dubai, announcing five new Iranian destinations on top of two it already serves.
Dubai’s Emirates, the region’s biggest carrier, this month announced flights to Iran’s second-largest city of Mashhad. It already flies to Tehran.
In some ways, loosening sanctions will mark a return to the way things used to be.
French automaker PSA Peugeot Citroen has an early advantage in Iran thanks to its strong market position in the country — a legacy of its former partnership with domestic automaker Iran Khodro, which assembled Peugeot-branded vehicles from kits.
Other European automakers have good brand recognition in Iran too, as many only officially cut their ties to Iran under pressure earlier this decade.
Sergio Marchionne, the chief executive of Fiat Chrysler, said this week that the Iranian market “will be an opportunity for all of us” if it opens up. Fiat only stopped selling cars in Iran in 2012, following similar moves by Peugeot, South Korean automaker Hyundai and German sports carmaker Porsche.
Ford is taking a more cautious tone, saying it complies with U.S. sanctions and will monitor changes that come out of the agreement. In the meantime, its Chinese partner, Changan, has signed a partnership with Iran’s Saipa Automotive Group to jointly develop new vehicles.
Other Asian companies have been making inroads too, meaning increased competition for new and returning Western companies.
In May, Brilliance Auto Group became the latest of several Chinese automakers to begin production in Iran, opening an assembly plant west of Tehran with a local partner, Pars Khodro, to make sedans and hatchbacks.
Chinese state-owned manufacturers of subway equipment have found a way around financial sanctions, striking a deal in 2013 to trade 315 train cars in exchange for Iranian oil.
South Korean companies have been building market share in Iran, too, after the two countries agreed to let Korean businesses use South Korean currency for financial transactions with their Iranian counterparts.
South Korea’s finance ministry said this week that expanding economic cooperation with Iran would be an opportunity for the country, which is a buyer of Iranian crude oil and exported $4.2 billion worth of goods to Iran last year.
