He is on a 5-day visit to Iran to explore prospects for expanding trade relations, in particular if and when Britain’s controversial divorce from the European Union comes into effect later this month.
"I was looking forward to seeing the country which is very important for my current role," Penney said in a talk with the Financial Tribune.
Reflecting on his mandate, he said he was appointed trade commissioner – a role that was created after the referendum in the UK to leave the EU – and given the opportunities that leaving the EU would present the UK , to promote the UK's future trade ties around the world, including the Middle East and Iran, according to Financial Tribune.
"The first objective is focused very much on trade relations with Iran and that's two-way trade, not just the UK selling goods and services to Iran, but also looks at how we can help Iranian companies sell more goods and services to the UK."
"I'm also responsible for foreign direct investment, which is talking to Iranian companies about the opportunities that exist for them to invest in the UK. I've met with some businesses since I've been here and there's quite a lot of interest and lively discussions around Iranian companies investing in UK industry as well as UK property, for example."
The official said there have been talks with various trade promotion entities in Iran and "how we can work with them to make it easier for UK companies to do business here. It’s the same with all the countries around the world."
Brexit Impact
Asked if Brexit can or will help contribute to trade between Iran and the UK, he said that clearly is the objective.
"Within the region I'm responsible for 12 countries and the UK's trade with those 12 countries today stands at around £45 billion (under$60 billion)."
According to Penney trade continues to grow consistently over the last decade although over the past two years bilateral trade with (P) GCC countries has slowed down and that's very much to do with oil price since in these countries a lot of large projects are funded by the government.
Sounding a guarded optimistic note, he was of the opinion that things would improve. “Trade has a positive trajectory and we do anticipate that trade increasing post-Brexit because we will have more tools at our disposal to enhance the terms of trade upon which we work with partner countries."
INSTEX
Penney said London is fully supportive of the creation of INSTEX, a mechanism by which UK Germany and France (E3) say they seek to support their commitments under the JCPOA (Iran's nuclear deal with six world powers in 2015 and abandoned by the US last year).
"INSTEX is not just about benefits to Europe, it's actually to ensure that Iran achieves the economic benefits that we all anticipate and are hopeful under the JCPOA. It’s something we are very committed to as a government."
"INSTEX was created as you know at the end of January and there's a lot of intensive work going on both sides.”
He said a technical team comprised of E3 and EU officials will visit Tehran in the coming week as part of the ongoing technical talks to work with their Iranian counterparts. The talks will be focused on the creation of the mirror entity in Iran.
" This is because we need the two ends of the SPV: one in Europe and one here in Iran and we have heard some encouraging comments around the work that Iran is doing to make sure that the counterparty mirror SPV will be created."
"We wouldn't be creating it if we weren't optimistic about it and it’s a mechanism backed by governments. I think that's a really important point to make that this further reinforces and encourages European businesses that the governments are fully supportive of doing trade with Iran because one of the issues we face is businesses not being confident about dealing with Iran.
INSTEX will operate "simplistically on a netting basis" so the idea is to minimize the flow of physical cash or money across the border in and out of Iran and it's predicated on having equal debits and credits on both sides.
"The SPV is not a bank, so at both ends banks will still need to be involved. The SPV aims to make it easier for European banks to support that trade"
The banking part is crucially important and that is why FATF is crucial for its success, he said, adding however that FATF is not a" prerequisite or requirement of INSTEX but the banks will want to know the counterparty mirror is FATF-compliant."
Asked when INSTEX will become operational, he said there's a sequence of events that should happen.
"It remains to be seen as the next step will be the formation of the mirror entity. As far as the Europeans are concerned, we are devoting a huge amount of time and resource to making this a success.”