Cyprus: Post-sanctions Iran: Exploring the Iranian market via Cyprus

Mohamed Ezz		Christiana Nicolaou

Iran holds a unique position in the Middle East. The country has an abundance of natural resources, a densely inhabited territory and shows a degree of openness to technological advancement, international developments and progress.

All of these aspects create a promising ground, supported further by recent resource-based evaluation rankings, which rate the country's economy as the 20th strongest worldwide due to the noteworthy wealth created by the very existence of its natural resources –not only oil and natural gas, but also chromium, copper, coal, iron ore, lead, manganese, zinc and sulphur.

Nevertheless, the Iranian market's uniqueness and promising potential was considerably compromised from 2012 onwards due to numerous traders, bankers, international shipping agencies, and global insurance companies withdrawing their investments from Iran in the wake of the oil embargo sanctions from the US and the EU as well as the EU's decision on freezing assets of the Iranian Central Bank, its imposition of restrictions on cooperating with Iran on matters of foreign trade, financial services, energy and technology, and the ban on insurance and re-insurance provisions by insurers within EU member states towards organisations in Iran and/or of Iranian beneficiaries.

Despite the various difficulties these sanctions created for Iran, the diversified nature of its economy helped the country through these hard times. Iran is not solely dependent on the oil sector; the manufacturing industry appears powerful enough, with the automotive sector in particular being the closest competitor to the country's petroleum industry in terms of size. Iran is now the largest car producer in the Middle East, while before the imposition of the economic sanctions it ranked 11th worldwide in terms of car production. Reinforcing the country's overall potential are reports denoting Iran as owning 15% of the global proven gas reserves and 11% of the global proven oil reserves, accompanied by 11 petrochemical complexes, as well as three major steel plants.

It is interesting to observe Iran introduce a brand new chapter after the July 14 2015 nuclear agreement concluded with six world powers as new perspectives and windows of opportunity are opening up, particularly in light of the expected lifting of sanctions during the first quarter of 2016.

Parallel to this, the available statistical information continues to indicate that Iran's population is a very well-educated one, with a workforce that includes many engineers and businessmen educated in Western countries. This fact, along with the country's natural wealth resources and its sophisticated manufacturing infrastructure capabilities, is prompting an optimistic anticipation of sound economic prosperity in Iran. Financial analysts also predict the annual growth rate of Iran's $420 billion economy to be between 2% and 5% during the first year of having the sanctions lifted, with the growth rate further increasing to a level of 7% to 8% in the following 18 months thus resembling Asia's so-called 'Tiger Economies'.

Against this backdrop, foreign companies (including small and medium-sized enterprises) must now analyse how to access the potential of Iran and transform it into an opportunity for business expansion. It seems as if cross-investment relations between Iran and EU investors are not being established directly due to various financial, political and strategic concerns, with both sides exploring convenient gateways of securing their investments.

Cyprus shares a long history of good relations with Iran, including bilateral agreements dating decades back. Among the more recent ones accords are the agreements on promoting and protecting investments, merchant shipping, medical science, tourism, education and culture.

In September 2014, new momentum was injected into the business connection between the two countries when the Chambers of Commerce of Iran and Cyprus signed a Memorandum of Cooperation.

Ties between the two countries have further strengthened since then. Two landmark events of August 2015 aimed to boost trade and cooperation between the two countries were the establishment of The Cyprus-Iranian Business Association with 75 enterprises having signed up as members, and the signing of an Agreement on the Avoidance of Double Taxation and Fiscal Evasion, along with accompanying protocol, based on the OECD Model Tax Convention framework.

Cyprus, therefore, as an already established and well-matured business centre and a low-tax jurisdiction actively promoting and protecting foreign direct investments, can act as a very suitable two-way gateway and financial hub for both EU and Iranian companies.

Mohamed Ezz (mohamed.ezz@eurofast.eu)

Eurofast Global, Cairo Office, Egypt

Christiana Nicolaou (christiana.nicolaou@eurofast.eu)

Eurofast Cyprus Office

Tel: +357 22 699 260

Website: www.eurofast.eu