The opening of Iran - an «El Dorado» of our time?

Iran has vast oil and gas resources and the second largest economy in the Middle East with its population of more than 80 million. The de-sanctioning and subsequent opening up of the country for western companies will result in major business opportunities in the world’s largest emerging market. International media has branded this as the “El Dorado” of our time, and more than 140 companies at an international oil conference hosted in Tehran in November 2015, including majors like BP, Statoil and Schlumberger.

The ease of sanctions towards Iran coincides with a difficult home market for several players in Norway and other western countries, especially within the oil and oil service sector. We have experienced a significant increase in inquiries from companies looking at business opportunities in Iran. Norwegian players have a particular interest in learning how they can position themselves towards this new market, and how to maneuver within Norwegian and Iranian law both today and going forward.

As the sanctions were eased this weekend Norwegian authorities followed up immediately by amending the regulations on sanctions towards Iran. For a longer period of time, it has already been held several talks between European and Iranian companies and authorities. Agreements on cooperation and future deliveries of goods from western companies have been entered into. Players from Europe and Asia are actively positioning themselves; meanwhile US players are still subject to a much stricter regime than European companies.

The border between legal and illegal actions has not been clear, and each specific case needs to be assessed independently. A general overview may nevertheless be deduced from the revised Norwegian regulations, and among them key industry sectors of the Norwegian economy. The lifting of sanctions in the following areas is of particular importance:

• Export of key equipment and technology to the oil and gas sector
• Export of key ship equipment and technology
• Technical and financial assistance in connection with the abovementioned goods and services

In addition, the prohibition on import, acquisition and transport of oil, natural gas and oil products has been lifted. Also the sanctions related to the Iranian bank and finance sector have been eased, and several previously sanctioned individuals and companies have been de-listed.

From a Norwegian point of view there are huge possibilities in relation to the major investments needed within the energy sector in particular, but also within the mining industry, infrastructure and retail. The fact that the US sanctions are still stricter than the European will make it difficult for many US companies in doing business in Iran, which in turn may give Norwegian companies a competitive advantage which should be explored.

Status as of today is however that certain sanctions are still in place, as only those related to the nuclear program has been eased. Financing and transfer of funds may still prove to be difficult, partially due to the US sanctions still restricting the use of US Dollars, and partially that European banks may be reluctant due to de-risking of activities and reputational risk

With a complex set of stakeholders, both commercially and politically, the remaining sanctions, the risk of snap-back mechanisms under the current ease of sanctions, and a challenging business climate for US companies, thorough preliminary investigations and both Norwegian and Iranian legal advice will prove key in order to succeed when entering the Iranian market.

About us

The law firm Steenstrup Stordrange frequently assists clients in connection with Iran specifically and sanctions generally. We have several lawyers with first-hand experience from the oil and oil service industry, and may assist companies within a broad range of legal matters related to both positioning towards and on-going business in Iran and other emerging markets. We are used to accompany our clients on the ground, and can also facilitate talks with local Iranian counsel.

Contact persons

For the article:

Andreas Slettvoll
Partner | Head of oil, offshore and maritime industry department
Mail: asl@steenstrup.no
Tel: +47 41423783

Lars Tormodsgard
Partner | M&A and commercial contracts
Mail: lto@steenstrup.no
Tel: +47 48016563

For any information for the Iranian welcome desk:

Zineb Bensaid
Senior consultant
Mail: zb@isfin.net
Tel: +32 483 359 515