Crossing the Rubicon: One-way street with Iran

With a sanction removal framework in place, little stands in the way of Iran’s hungry markets

COMMENT, PMV, Equipment, Iran, Middle east, PM

Change is certainly coming to the vehicle and equipment industry in the region with the lowering of punitive sanctions against Iran.

The development brings a reopened market for equipment producers and dealers, but also interesting possibilities for vehicle manufacturing — as even under sanctions Iran grew into the largest vehicle producer across the Middle East, North Africa and central Asia.

The timing of the rapprochement between P5+1 (the permanent members of the UN Security Council, plus Germany) and Iran, could hardly have come at a better time for the industry, given the systematic collapse of various regional country markets as a result of conflict.

The bigger mystery is why Germany and France, both of which had significant interests in the country (see p.18), ever agreed to sanctions in the first place.

Whatever the case, Iran can now look forward to somewhat of a boom on multiple fronts as it regains access to parts and at least $50bn in frozen state assets.

Credit where credit is due, the U-turn would not have been achieved without the level-headedness of President Barack Obama and President Hassan Rouhani, who, during his election campaign, pertinently noted: “It is good for centrifuges to operate, but it is also important that the wheels of industry are turning.”

President Obama was also right to point to the position of Iran’s Supreme Leaders on the subject of nuclear armament — with both Ruhollah Khomeini and Ali Khamenei unequivocally ruling nuclear weapons to be contrary to Islam.

Moving forward, nothing short of Iran’s unilateral breaking of terms can risk quashing the economic aspirations of its citizens and prospective investors.

In last month’s big interview, Doosan’s regional directors confirmed that Iran had very much been their second largest market before the sanctions bit.

Indeed, the country’s equipment and heavy vehicle industry looks to be among the most promising of opportunities.

This sentiment also echoes across sectors, and you need only look at the rush to mine central Asia to imagine the fervour that will soon take hold over Iran’s mineral resources, which currently represent 7% of the world’s reserves.

Putting two and two together, mining means earthmoving machinery, heavy transport vehicles, ancillary equipment and modernised supply fleets — and stable equipment markets in the Middle East are hard to come by these days.

Given the metaphorical carrot of prospective exports to Iran’s domestic market of 74 million people and the stick of returning to a cold war of cyclical and largely meaningless rhetoric, the P5+1 has spoken on what it would prefer.

The near universal support for bringing Iran back into the fold provides a powerful mandate for companies and investors wishing to re-establish themselves in Iran, and in this way the nation has very much crossed the Rubicon.

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