France Spearheads EU’s Resumption of Business With Iran

EghtesadOnline: After a lengthy negotiation, the Renault Group finalized a contract for a joint venture with Iranian carmakers on August 7.

News ID: ۷۷۸۸۸۹

30 August 2017

According to the terms of the contract, 60% of the shares of the company created will be held by Renault, as the Iranian state company IDRO (Industrial Development and Renovation Organization of Iran) will hold 20% and 20% will go to Negin Khodro–the official dealer of imported Renault cars in Iran. The stated objective is to increase the production of different models of Renault vehicles to 150,000 units per year.

This contract is in addition to the long list of transactions of French companies with Iran in the period following the nuclear agreement, formally called the Joint Comprehensive Plan of Action, with six world powers, concluded in July 2015. At that time, Iran’s President Hassan Rouhani, accompanied by Mohammad Reza Nematzadeh, the then industries minister, went to Paris.

On the French side, two foreign ministers, Laurent Fabius and Jean-Marc Ayrault, as well as ministers of economy, transport, foreign trade, agriculture and higher education, traveled to Tehran, reads an article recently published on the website of French weekly Economie Matin. According to Financial Tribune, a translation of excerpts follows:

In terms of economic relations, according to a report by Muriel Penicaud, former director of the French Agency for International Investments, since the signing of the nuclear agreement, officials from more than 300 French companies visited Iran and more than 2,000 companies expressed their wish to work with Iranian partners.

The biggest contract was signed by the oil giant Total: a more than 50% stake in an investment of about $4.8 billion for the development of an offshore gas field on the Persian Gulf. Other important contracts have also been signed or are under negotiation: The sale of more than 100 Airbus aircraft, ongoing negotiations for the sale of about 40 medium-haul aircraft, PSA (Peugeot-Citroen) contracts with top Iranian automakers Iran Khodro and SAIPA, that of Alsthom with the Iranian companies IDRO and IRICO railcars, among many other joint venture contracts in various fields.

The result has been a 235% increase in trade between Iran and France in 2016, according to Michel Sapin, former economy and finance minister, in an interview with the Iranian daily Donya-e-Eqtesad in its issue of March 4, 2017.

With its 80 million population and an eager market, Iran has favorable conditions for business, but there are also risks and obstacles to this enticing picture that could act against the current process.

Internationally, the intransigence of US President Donald Trump against Iran by imposing new sanctions is a major handicap for potential investors.

A US Congress measure against the Iranian Revolutionary Guard Corps passed in July 2017 prevents major European banks from financing transactions with Iran for fear of US retaliation.

A political logic, not merely a commercial one, is at the origin of contracts signed by French companies with Iranian companies. A close and case-by-case analysis of these transactions clearly shows that it is the French side that benefits most and not the Iranian side. For political reasons, the Iranian government insists on the multiplication of such contracts to encourage the European Union, and more particularly France, to remain on its side facing the United States.

Thus, if the situation of Iranian power on the domestic and foreign scene improves, these contracts will undoubtedly be called into question. Conversely, if the Iranian situation deteriorates and its confrontation with the United States is exacerbated, French transactions will also fall under US sanctions. In light of these facts, French companies have shown great courage in doing business with Iran. But this remains an extremely risky bet.

Nonetheless, the European Union, including France, still seems to favor the moderate faction headed by President Hassan Rouhani. It is with this vision that the EU has invested in economic relations with Iran in the hope of seeing internal and international developments go in the direction of strengthening the position of Rouhani.