EU Embargo of Russian Oil Spells Trouble for Iran

European Union leaders have agreed on a landmark embargo of Russian oil that will seek to slash imports by 90 percent by the end of the year. The embargo represents a major intensification of European sanctions on Russia following the invasion of Ukraine.

For most oil producers, the embargo will be a boon. While the measures were widely expected and therefore may have been partly priced-in by traders, oil prices jumped on the news. Saudi Arabia, for one, is already planning how it will spend the windfall enabled by high oil prices.

But for Iran, and to a lesser extent Venezuela, the embargo of Russian oil is bad news. For countries whose oil exports are subject to U.S. or EU sanctions, China is the buyer of last resort. For several years, China has been the sole country to continue significant purchases Iranian and Venezuelan crude oil, ignoring the threat of U.S. secondary sanctions. These imports have been an important contributor to Iran’s economic resilience under sanctions. However, this is not because revenues are flowing back to Iran. The revenues accruing in China are being used to sustain Iran’s imports of crucial intermediate goods for the country’s manufacturing base.

Iran has also benefited from increased financial resources in the United Arab Emirates and Malaysia, two countries which are serving to intermediate Chinese imports of Iranian oil. Most Iranian oil arriving in China is declared as an import from the UAE or Malaysia. As it stands, Iran is consistently exporting more than 1 million barrels per day of crude oil to China.

Russia’s rise as a major energy exporter to China corresponds to the period in which Iranian oil was taken off the market due to the impacts of US, EU, and UN sanctions programmes—Iran’s demise as an oil exporter helped open the door for Russian exports.

The new EU embargo on Russian oil will intensify competition between Russia and Iran in China’s oil market. Russian suppliers are already offering buyers a 30 percent discount on benchmark prices, a much steeper discount than Iran has offered Chinese buyers in recent years. Russia and Iran will be competing for the business of the limited number of Chinese refiners willing to process “sanctioned” oil.

Already, some Chinese “teapot” refiners are replacing Iranian oil with Russian oil because of the attractive discounts on offer. So far, customs data does not reflect a dramatic swing away from Iranian imports. But it is early days and the embargo will dramatically change incentives. According to the IEA, around “60 percent of Russia’s oil exports go to OECD Europe, and another 20 percent go to China.” While some customers, such as India, might import the Russian barrels that would have otherwise gone to Europe, political and economic realities will require Russia to push more oil into the Chinese market.

Looking to Chinese customs data for April, Russia’s ability to squeeze Iran becomes clear. It is clearly a more important supplier of crude oil to China. While logistical bottlenecks might prevent an immediate jump in Chinese purchases, all of the Russian barrels already flowing to China are newly subject to discounts—China can insist on lower prices now that the EU embargo is in place. This in turn creates pressure for Iran to match Russian discounts or risk losing market share.

While it is possible that the further pressure on global supply might push oil prices even higher, minimising the loss of revenue for Iran even as Chinese imports fall, in the medium term, Russia has the means to bully Iran due to its lower fiscal breakeven price and lower production costs. At the outset of the COVID-19 pandemic, Vladimir Putin boasted that Russia could withstand oil prices of as low as $25 dollars per barrel for as long as a decade. Iran’s oil sector, already weakened by a decade of sanctions, does not have the same ability to endure low prices. In short, Russia can afford to undercut Iran. 

Plus, for whatever period that Russian oil is not subject to U.S. secondary sanctions, Chinese tankers and refiners may prefer to handle Russian crude, due to the lower risk of enforcement action.

Iran has a couple of options here. First, it could try and negotiate an arrangement with Russia, agreeing not to engage in a race to the bottom when it comes to pricing their sanctioned barrels for China. Iran might even be able to play a role as an intermediary in Russian energy exports to China, importing refined products across the Caspian and exporting crude oil to China as part of a swap arrangement. But this kind of cooperation is highly unlikely given the track record of Russia-Iran relations and the fact that Russia sees Iran as the junior partner in the relationship.  

The second option would be for Iran to try and get itself out of this predicament by taking decisive steps to restore the nuclear deal. Doing so would see the rollback of U.S. secondary sanctions on Iranian oil and enable the resumption of exports to European buyers precisely when those buyers need it most. Earlier this month, EU High Representative Josep Borrell commented on the heightened value of the nuclear deal for Europe in the wake of the Russia crisis. He told the Financial Times that “Europeans will be very much beneficiaries from this deal” as the “the situation has changed now.” He added that “it would be very much interesting for us to have another [crude] supplier.”

Earlier this week, Iranian officials boasted that oil revenues were up 60 percent year-on-year owing to the high oil prices. But the situation has changed now. As the EU moves forward with its historic embargo, Iran’s oil revenues are suddenly in Russian crosshairs.

Photo: Kremlin.ru

Removing the IRGC from the FTO List Risks Nothing

As we wait for the resumption of the Iran nuclear negotiations, reports indicate that the “final hurdle” is Iran’s demand for the removal of a key sanctions designation. Iranian negotiators are seeking the removal of the Foreign Terrorist Organisation (FTO) designation placed on the Islamic Revolutionary Guard Corps (IRGC), part of Iran’s armed forces. The FTO designation was imposed by the Trump administration in April 2019.

President Biden will probably lift this designation to clear the way for the mutual restoration of the Joint Comprehensive Plan of Action (JCPOA). The restoration of the JCPOA would see Iran’s nuclear programme once again placed under the strictest monitoring and verification regime ever devised, ending a four-year period of growing concerns over possible Iranian proliferation. But even with the enormous security gains on offer, Republic lawmakers and other critics are suggesting that the removal of the FTO designation is an unacceptable concession to make.

The arguments being made against the removal of the FTO designation are weak. More judicious critics of the move concede that little is at stake. Matthew Levitt of the Washington Institute for Near East Policy has written that the designation “was largely symbolic” and that its removal “would have few if any legal implications.” Still, he considers removing the FTO label to be a “terrible idea”—a determination that reflects how politics can trump pragmatism in American policymaking.

Levitt makes four arguments as to why Biden should not remove the FTO designation. First, he argues that Iran is treating the removal of the FTO designation as a red line because the leadership “wants something it can point to when attempting to persuade investors that it is not really involved in terrorism.” Levitt ignores the fact that the Iranian leadership has not demanded the undoing of October 2017 designation of the IRGC as a Specially Designated Global Terrorist (SDGT). Nor has Iran insisted that its status under US law as a State Sponsor of Terror be rescinded. Iran is obviously not seeking to change the minds of foreign investors, whose decisions to engage in the Iranian market will remain predicated on significant due diligence to avoid transacting with IRGC entities, all of which will remain under sanctions. Iranian negotiators are seeking the removal of the FTO designation to demonstrate to the IRGC’s leadership that a constructive stance towards diplomacy with the United States can bear fruit. It is precisely because the imposition of the FTO designation was politically symbolic that its removal is being sought.  

Second, Levitt argues that because Iran has insisted that the “nuclear negotiations must remain focused on its nuclear activities alone,” it would be a mistake to “provide relief from any terrorism-related sanctions.” Doing so would “undermine the efficacy of other non-nuclear sanctions.” But this argument is undercut by the Trump administration’s own messaging. The White House statement on the FTO designation makes clear that the move was not imposed as a discrete action to counter Iranian terrorism, but rather as a means to “significantly expand the scope and scale of our maximum pressure on the Iranian regime.” A central feature of the “maximum pressure” campaign was the “sanctions wall,” a rapid expansion in the scope of the Iran sanctions programme intended to make it more difficult for President Biden to re-enter the Iran nuclear deal.

Given that the FTO designation was symbolic and that its removal will not meaningfully change the legal status of the IRGC, the designation was clearly imposed with another goal in mind. The FTO designation was a non-nuclear sanctions measure imposed to make nuclear diplomacy more difficult. If removing the designation is necessary to secure the tremendous national security benefits of the JCPOA, then doing so is justified. In fact, failing to remove the designation would undermine the efficacy of US sanctions policy because it would prove that presidents can tie the hands of their successors in ways that make diplomacy nearly impossible to conduct.

On a related note, Levitt claims that “to protect the credibility of US sanctions authorities worldwide… the IRGC should not be removed from the FTO list until there is evidence it has ceased terrorist activities.” This is, on face, the most logical argument being made by those opposed to the removal of the FTO designation. The IRGC will almost certainly continue to engage in its “forward defence” activities, including support for proxies that the US considers terrorist groups, in the aftermath of the nuclear deal. At the same time, removing the designation would not increase the threat posed by the IRGC. Speaking to reporters last week, CENTCOM commander General Kenneth McKenzie explained that he did not expect the removal of the FTO designation on the IRGC to impact US forces. “In terms of the way we think about [the IRGC], in the terms of the way we think about the threat, and what they do on a daily basis across the theatre, I don't think much would change,” he stated.

Given that any operational impact will be limited, there are two reasons why the removal of the FTO designation is warranted absent a change in behaviour. First, the removal of the FTO designation cannot be construed as a signal that the IRGC has ceased its support for terrorism. The organisation will remain subject to wide range of sanctions, including the SDGT designation and there will be no change in messaging from the Biden administration on this point. Second, the US government also assesses that the IRGC has major influence over Iran’s national security doctrine. That the nuclear negotiations have reached this late stage clearly demonstrates that there is a consensus among Iranian policymakers, including among the ranks of the IRGC, that restoring compliance with the JCPOA is in the country’s interest. Returning to Levitt’s concern over the credibility of US sanctions, a symbolic move to recognise the IRGC’s inherent support for the successful conclusion of the Iran nuclear negotiations is sensible, especially as the Biden administration aims for future dialogue on a wider set of security concerns.

Finally, Levitt points to a “serious messaging problem” and claims that “America’s partners and allies in the region” would be dismayed if the US were to “take pressure off the [IRGC] by delisting it.” Israeli Prime Minister Naftali Bennet and Foreign Minister Yair Lapid have written a joint letter urging President Biden not to scrap the FTO designation. Reports claim that UAE leaders are “shocked” that the FTO designation may be removed. But these various protests appear to be part of the horse-trading by partners and allies that has long burdened Biden’s efforts to restore the nuclear deal. By seeking to impose political costs at this late stage, regional leaders are aiming to extract their own concessions from the Biden administration as part of their acquiescence to a nuclear deal that looks increasingly likely.

Even so, GCC leaders have yet to directly comment on the possibility that the FTO designation will be removed. The possibility of removal became public knowledge in the summer of last year. The GCC issued a joint statement with the United States in support of the JCPOA last November. It is highly unlikely that the GCC leaders would treat the removal of the FTO designation as a kind of red line given their interest in maintaining a regional security dialogue that includes bilateral engagement with Iran. Senior Saudi and Emirati officials have held meetings with Iranian officials, including those linked to the IRGC, over the past year. Consider also that the UAE just hosted an unrepentant Bashar al-Assad, leaving the Biden administration “troubled.” Clearly, regional leaders are ready to set optics aside when there are hard security benefits to be gained.  

Given the noise about the FTO issue over the last few weeks, the Biden administration is already paying a political cost for the anticipated removal of the designation. But the administration should not lose sight of what will be gained. Removing the designation in no way changes the legal or political status of the IRGC, but it does enable the restoration of the Iran nuclear deal. For those who care about US national security, the choice is clear.

Photo: IRNA

GCC States Bet on Nuclear Deal as They Seek Better Relations with Iran

Iranian foreign policy has been in high-gear over the last week. As Iranian negotiators made their way back to Iran’s capital from the seventh round of nuclear talks in Vienna, the UAE’s top national security adviser Sheikh Tahnoon bin Zayed Al Nahyan arrived in Tehran. Al Nahyan’s visit is the latest example of the significant shift underway in the foreign policies of Iran’s Arab neighbours, including in their views of the Iran nuclear deal.

In a recent joint statement, the US and GCC declared that the restoration of the Joint Comprehensive Plan of Action (JPCOA) would “pave the way for inclusive diplomatic efforts to address all issues that are necessary to ensure sustainable safety, security, and prosperity in the region.” The GCC was far from unified in its support for the nuclear deal when negotiations were first underway between 2013-2015. Oman was instrumental in facilitating backchannel talks between Iran and the United States. Qatar and Kuwait were vocal supporters of the diplomatic process once it became public. But Saudi Arabia, Bahrain, and the UAE, maintained a cautious position on the nuclear deal and criticised the negotiations for failing to address Iran’s missile program and regional activities. Behind these criticisms was a more fundamental fear that a rapprochement between Iran and the United States would alter Washington’s relationships with its traditional partners as they had not been extensively consulted in the lead-up to the negotiations. The JCPOA appeared poised to tip the regional balance of power in Iran’s favour.

Nevertheless, all six GCC states officially welcomed and endorsed the JCPOA following the Camp David Summit hosted by President Obama in May 2015. The joint statement issued by the US and GCC after the summit highlighted security cooperation and security assurances with a particular focus on “countering Iran’s destabilising activities.” Still, the GCC member states “affirmed their strong support for the efforts of the P5+1 to reach a deal with Iran,” noting that “such a deal would represent a significant contribution to regional security.” In addition, they “reaffirmed their willingness to develop normalised relations with Iran should it cease its destabilising activities.”

President Obama aspired for dialogue between the GCC states and Iran, and stated that the “purpose of security cooperation is not to perpetuate any long-term confrontation with Iran or even to marginalise Iran.” He also suggested that Saudi Arabia should “share” the region with Iran. This encouragement, however, led nowhere.

Saudi Arabia, in particular, attempted to hamper the implementation of the JCPOA. Just days before the official implementation day of the agreement on January 16, 2016, Saudi Arabia executed a prominent Shi’a cleric which resulted in protests in front of the Saudi diplomatic missions in Tehran and Mashhad. In response to the ransacking of the embassy by protestors, Saudi Arabia cut off all diplomatic and commercial ties with Tehran and pushed other countries in the region to follow suit. The tensions continued to rise and any hopes for regional dialogue faded with the end of the Obama presidency. Divisions amongst the GCC states toward Iran and the JCPOA deepened when President Trump took office.

While Oman, Qatar, and Kuwait attempted to facilitate or mediate talks between Tehran and Washington in an attempt to stave a deeper regional crisis, the UAE, Saudi Arabia, and Bahrain supported the Trump administration’s “maximum pressure” campaign against Iran, launched following the US withdrawal from the JCPOA. Over the next few years, rising tensions between Iran and the US increased the risk of conflict in the region.

Key flash points included a series of attacks on tankers in the Persian Gulf, including off the coast of Fujairah in May 2019. Later, in September of that year, there was an attack on Saudi Arabia’s most important oil processing facilities in Abqaiq and Khurais. These attacks were attributed to Iran and its proxies. But there was no clear US response to these attacks and the UAE and Saudi Arabia realised that they can no longer solely rely on an American security guarantee. Trump’s escalatory Iran policy had become a liability.

The election of Joe Biden created a new political reality for the Middle East. During his campaign, Biden made clear that his administration would seek a return to mutual compliance with the JCPOA. He also called Saudi Arabia a “pariah” state, indicating that Saudi influence would be diminished in Washington. Biden also committed to reducing the US footprint in the Middle East.

Responding to these shifts, Saudi Arabia and the UAE have pursued a de-escalatory approach in their foreign policy. They ended the more than three-year long blockade on Qatar at the Al Ula Summit, participated in the Baghdad Conference for Cooperation and Partnership, and increased their back-channel talks with Tehran. These bilateral and multilateral diplomatic developments were unimaginable just a few years ago.

The UAE has been most adamant about repairing diplomatic ties with Iran. Al Nahyan’s visit follows a steady tempo of exchanges over the last two years. In November, Iran’s new deputy foreign minister, Ali Bagheri Kani, travelled to Abu Dhabi to meet his Emirati counterparts—they agreed to open a new chapter in bilateral relations. A few days later, the Iranian and Emirati foreign ministers had a phone conversation where expansion of bilateral ties was stressed.

Saudi Arabia and Iran have held several rounds of talks in Baghdad that included key officials from both countries. Progress has been limited, but if continued, these talks could yield some much-needed results. A small goal would be the resumption of formal diplomatic ties. A bigger goal would be an end to the war in Yemen.

But the diplomacy now underway can have more than just political dividends. During meetings held in Riyadh in mid-November, the political directors of the E3 and the US Special Envoy for Iran welcomed their “regional partners’ efforts to deescalate tensions and promote dialogue in the region” and “underlined that enhanced regional dialogue and a return to mutual compliance with the JCPOA would… allow for more regional partnerships and economic exchange.” The potential for economic exchange was reiterated in a subsequent statement, in which the GCC officials discussed their efforts “to build effective diplomatic channels with Iran,” and affirmed that “deeper economic ties after the lifting of US sanctions under the JCPOA are in the mutual interest of the region.” Last month, Rob Malley, Biden’s Iran envoy, also talked about the notable interest in economic engagement with Iran that had come through in his discussions with GCC officials. Moreover, given that the attacks stemming from Iran’s response to “maximum pressure” focused on economic infrastructure, the linkages between security and economics dividends are clear.

The GCC states’ acknowledgement they can benefit from JCPOA-related sanctions relief suggests that regional diplomacy has reinforced trust in the nuclear talks. The nuclear deal has an important role to play in the emerging framework for regional diplomacy. That bodes well for the deal’s future if it is successfully restored.

Photo: IRNA

Abu Dhabi Can’t Afford To Keep Iran Out Of Dubai

This article was originally published in LobeLog.

As the world teeters on the edge of another financial crisis, few places are being gripped by anxiety like Dubai. Every week a new headline portends the coming crisis in the city of skyscrapers. Dubai villa prices are at their lowest level in a decade, down 24 percent in just one year. A slump in tourism has seen Dubai hotels hit their lowest occupancy rate since the 2008 financial crisis, even as the country gears up to host the Expo 2020 next year. As Bloomberg’s Zainab Fattah reported in November of last year, Dubai has begun to “lose its shine,” its role as a center for global commerce “undermined by a global tariff war—and in particular by the U.S. drive to shut down commerce with nearby Iran.”

Dubai, an entrepôt where the workers are migrants and where property is king, is especially vulnerable to global recessions. In the immediate aftermath of the global financial crisis in 2009, Dubai’s real estate market collapsed, threatening insolvency for several banks and major development companies, some of them state-linked. Abu Dhabi, which controls the UAE’s vast oil wealth, threw Dubai a lifeline with an initial $10 billion bailout, later expanded to $20 billion.

But there was a second, hidden “bailout” that helped keep Dubai afloat. When the Bush administration enacted the Iran Sanctions Act in 2006, deepening Iran’s economic turmoil under President Mahmoud Ahmadinejad, there was a significant increase in the already significant volume of capital flight from Iran, most of which landed in Dubai. One 2009 estimate places the total value of Iranian investments in Dubai at $300 billion.

While global investors pulled their capital out of Dubai in the aftermath of the global financial crisis, the Iranian business community mostly stayed put, maintaining their deposits in Dubai’s teetering banks. Iranians continued to invest in Dubai’s ailing property market and used Dubai’s ports to conduct re-exports as sanctions restricted Iran’s direct access to global markets. For Iran’s captains of industry and finance, Dubai was not some far flung emerging market, but a vital channel to the global economy in the face of tightening sanctions. As Iranian economist Saeed Laylaz smartly observed in 2009, “Dubai is the most important city on earth to the Islamic Republic of Iran, with the exception of Tehran.”

The financial crisis and U.S. sanctions had served to deepen the mutual dependence between Dubai and Iran—an outcome that ran counter to the goals of policymakers in both Abu Dhabi and Washington.

The Crown Prince of Abu Dhabi and the defacto ruler of the UAE, Sheikh Mohammad bin Zayed (MBZ), has long seen Iran as a rival. MBZ is hostile to Iranian influence over Dubai, where many of the leading trading families can trace their roots to Iran, a legacy of centuries of trade in the Persian Gulf. MBZ’s dream of an assertive UAE would have been undercut had Dubai continued to develop into the Hong Kong to Iran’s China.

The Obama administration’s effort to build a multilateral sanctions campaign offered MBZ the opportunity to curtail Iran’s presence in Dubai’s economy. As they sought to isolate Iran economically, U.S. officials traveled to Dubai to meet with banks and companies to discourage them from engaging in commercial activities with Iran. Rather than resisting U.S. interference in the UAE’s economic sovereignty, Abu Dhabi amplified the American message– the bailout had put Abu Dhabi in a position to dictate policy to Dubai. The new policy called for Dubai to close its doors to Iranian money.

In subsequent years, the presence of Iranians in Dubai’s economy has diminished significantly. Trade persists, but banks refuse Iran-origin funds, close the accounts of Iranian companies, and deny services to individuals who maintain Iranian citizenship. More recently, as the Trump administration cultivated ties with MBZ, the UAE began to reject more Iranian applications for residency and business visas were routinely denied. Nearly 50,000 Iranian residents have left the UAE in the last three years.

But there are new signs that Dubai may be seeking to repair its trade relationship with Iran. In a recent interview, Abdul Qader Faghihi, president of the Iranian Business Council in Dubai, declared that a “space for trade between Iran and the UAE has been reopened.” Though any opening remains in its initial stages, Faghihi referred to negotiations with “the rulers of Dubai” in which Dubai authorities “accepted that Iranians who have the capital and intend to conduct legitimate trade with the UAE will be granted business visas and that banks will open accounts for these Iranians on instruction from Dubai authorities.”

This small opening may be related to efforts to reduce tensions around the Strait of Hormuz as Abu Dhabi reconsiders its regional entanglements and the risk of conflict in the region—it is unlikely that Dubai would be able to extend an olive branch to the Iranian business community without the consent of Abu Dhabi. But economic fears, and not security concerns, provide the clearest reason why a change in policy may be on the cards—Dubai will soon need another “bailout” from Iran. Farshid Farzanegan, head of the Iran-UAE Joint Chamber of Commerce, recently stated “The UAE’s behavior towards Iranian businessmen has changed… and moves are being taken to resume relations… As the UAE economy slumps, officials have decided to cooperate with Iran.” 

Ten years on from the last financial crisis, Dubai is still repaying its debts to Abu Dhabi. As the UAE braces itself for the next global recession, Iran remains the only country capable of injecting significant capital into Dubai at a time when global investors will pullback. Iranian business leaders in Dubai are wondering—how long can Abu Dhabi afford to freeze them out?

Photo: Wikicommons

Arab Business in Iran: Looking Beyond Regional Rivalry

With high disposable incomes furnished through oil rents, the GCC economies are geared towards the consumer. Famed for massive malls, expensive cars, luxury housing, and entertainments galore, perhaps no other group of countries around the world are as defined by such conspicuous consumption. To underscore the point, a recent report by Global Footprint Network, an environmental protection institute, suggests that if every person in the world consumed resources at the same level as Emiratis, we would need 5.4 planet earths to sustain humanity.

Created to answer this insatiable demand, the GCC region's most successful conglomerates are not in manufacturing or industry, but in consumer-focused sectors like food service, real estate, hospitality and leisure, luxury retail, and FMCG.

Given that Iran has a large consumer driven economy, with a middle class that will benefit from post-sanctions economic growth, GCC companies are actually very well positioned to transfer their knowhow to the Iranian marketplace. A recent study of which companies would most quickly benefit from an Iran deal was “loaded” with GCC companies, particularly those based in Dubai.

This fact complicates the political economy of regional relations in the Perisan Gulf region. Most analysis focuses on the increasing rivalry between Iran and the Gulf states, especially Saudi Arabia. However, the prospects for business tell another story, in which trade and investment can aid the development of a regional geopolitics based on mutual gain rather than mutual antagonism.

To illustrate this point, below are 5 leading companies from the GCC, which could make it big in Iran due to their consumer driven businesses.

It remains to be seen if opportunities in Iran will be enough to outweigh the rivalry in regional politics. But it wouldn't be the first time that commerce has overcome conflict.

• Majid Al Futtaim Group, Dubai, UAE- Retail Development

Revenue: USD $6.8 billion 

A holding company specializing in large-scale retail and hospitality projects, MAF Group owns some of the iconic malls and hotels in the Middle East. While we might imagine an MAF backed five-star mall development in Iran one day, it is MAF’s longstanding role as the regional partner for French hypermarket chain Carrefour that has won them early success in Iran. With the first store opening in 2009, a subsequent $400 million dollar investment has seen hypermarkets open in Tehran, Shiraz, and Esfahan. The company boasts of plans to open 15 more locations, and aims to dominate the sector with a mix of hypermarkets and smaller supermarkets.

• Aujan Group Holding, Dubai, UAE- FMCG

Revenue: USD $200 million (Iran entities only)

Continuing the FMCG theme, another Arab success story in Iran can be seen in the experience of Aujan Holding Group, the regional partners for The Coca-Cola Company, which purchased 50% of the Aujan Industries subsidiary in 2011 for nearly USD $1 billion. A separate Iran-registered joint stock company, Aujan Industries Iranian Company, is the manufacturer and distributor of Rani and Coca-Cola beverages in Iran.  Importantly, Coca-Cola’s tie-up with Aujan excluded the Iranian business. This leaves the door open to future capitalization and expansion, as Iran exhibits the second largest absolute value growth in MENA region soft drinks in the next few years.

• Olayan Group, Saudi Arabia- FMCG and Food Service

Revenue: Undisclosed

A diversified Saudi conglomerate, Olayan has operations in everything from business services to construction. But it is the group’s holdings in fast-moving consumer goods (FMCG) and food service that position it for an Iran market entry. In the area of consumer goods, Olayan has longstanding relationships with global giants such as Mondelez International, Nabisco, Kimberly Clark, and Colgate-Palmolive. These US-based multinationals have limited exposure to Iran’s market, and Olayan’s local supply chain could be adapted to ensure distribution to Iran. But perhaps more uniquely, Olayan is the regional franchisee of Burger King. The first firms to rollout globally recognized fast food and fast-causal chains in Iran will tap into a massive unmet demand, and Olayan is a company with the muscle to do so.

• RAK Ceramics, Ras al Kamiah, UAE- Ceramics

Revenue: USD $1 billion

It is a little known fact that the largest ceramics manufacturer in the world is located in one of the lesser-known Emirates. RAK Ceramics produces everything from toilet bowls to tableware in over 8000 designs. RAK Ceramics has a presence in Iran, but tough economic conditions and supply chain issues have depressed profits this year. The company has begun scaling back its Iran operation. RAK Ceramics boomed on the back of procurement in the GGC, as large-scale residential and hospitality developments mushroomed. In this way, the supplier’s success is connected to consumer demand. Similar construction volumes could be expected across Iran’s multiple metropolises in a post-sanctions environment. As a global leader, RAK Ceramics is certainly poised to benefit as this massive market on its doorstep becomes easier to engage.

• Damac, Dubai, UAE- Real Estate Development

Revenue: $556 million (Damac Properties only)

With over 100 buildings either complete or nearing completion, Damac has emerged as a leader in Dubai’s crowded real estate development market. Until now, groups like Damac have seen Iran as a source of high network individuals, eager to establish a residence in Dubai. But looking forward, economic growth and freer financing will make Iran the next big real estate story in the Middle East. As a private entity, Damac is likely to be less entangled in the political battles between Abu Dhabi and Dubai on the issue of engaging Iran. This differentiates it from Emaar, with its legacy as a formerly 100% government owned entity. Investors are taking note. The listed entity Damac Properties Dubai saw its stock rise over 8% immediately following the conclusion of the April JPOA framework agreement between Iran and the P5+1 powers. 

Photo Credit: Koroush Complex