Introduction 

It is yet to be seen if multinational companies will (re)enter the Iranian market amidst promising indirect talks between the United States and Iran on the Iran Nuclear Deal. 

Iranian and American diplomats have held negotiations through intermediaries in Vienna as President Biden’s administration has signalled that it intends to return to the deal, formally known as the JCPOA.

The Historic Iran Nuclear Deal

In 2016, the historic nuclear deal lifted billions of dollars’ worth of sanctions and a U.N. arms embargo on Iran, in exchange for significant restrictions on its nuclear program. 

The deal technically unshackled European and Asian companies from most restrictions and sanctions related to doing business in Iran. American firms continued to be under stringent restrictions on investing and trading with Iranian entities due to non-nuclear sanctions. 

While firms could still run afoul of American secondary sanctions, Iran represented a promising market. With a high demand for foreign goods, an educated and well-represented middle class, significant oil and rare mineral reserves, and an urgent need for infrastructure upgrades and economic diversification, foreign companies were eager to do business in the Islamic Republic. 

European and Asian multinationals swiftly seized the opportunity. Airbus signed a $20+ billion deal with IranAir to replace its ageing fleet. European car makers Daimler and Peugeot-Citroen established joint ventures with Iranian entities. Total signed a twenty-year contract with the National Iranian Oil Company to develop and produce new gas field infrastructure. China’s National Nuclear Corporation signed a contract with the Iranian government to redesign its Arak nuclear reactor. 

The headline-grabbing deal announcements led some to believe that economic interdependence between Tehran and Washington was feasible, and could hopefully lead to a new chapter in their relations. 

United States’ Withdrawal and Trump’s Maximum Pressure 

The Trump administration’s 2018 withdrawal from the JCPOA and imposition of sweeping sanctions on Iran as part of its “maximum pressure” campaign was the death knell of Tehran’s burgeoning economic relationship with foreign companies. 

Global financial institutions were especially affected by the American sanctions regime. In September 2019, the Treasury Department sanctioned Iran’s Central Bank and threatened any foreign financial institution with secondary sanctions if they facilitated “significant financial transactions or provided significant financial services” to it. A year later, Treasury gave foreign financial firms 45 days to cease any activities with eighteen major Iranian banks. 

These sanctions effectively restricted Iran’s access to global capital, including its own, and made transacting with Iranian entities quasi-impossible for foreign companies. 

The Europeans’ attempts to lobby Washington to grant exceptions for their multinationals firms and banks failed. No exceptions were to be made. 

Foreign companies were forced to choose between continuing to pursue business in Iran or face the wrath of American secondary sanctions. The prospect of being shut out of the American financial system was too great for Total, Daimler, Peugeot, and the hundreds of other firms in Iran. 

Asked about the prospects of foreign industry staying in Iran, Total CEO Patrick Pouyanné stated, “There’s not a single international company like Total who can work in any country with secondary sanctions….The reality is that the capital of the world is in the hands of the U.S.”

Contracts were annulled and joint-ventures disbanded. Firms hastily fled the Iranian market leaving millions of dollars of unrecoverable assets behind.  

Looking Forward 

While the United States will most likely return to the JCPOA, foreign firm’s en-masse homecoming to the Iranian market is less certain. 

Their risk-appetite is considerably lower than it was six years ago. Long-standing economic, reputational, and political risks associated remain, regardless if Washington were to re-join the deal.

Foreign firms will continue to face significant compliance risks, such as sanctions for transacting with certain sectors of Iran's economy, most notably IRGC-affiliated entities. 

Companies conducting business in Iran will be exposed to reputational risks in countries opposed to Iran, and may be shunned by consumers in their markets. 

Opposition to the deal is rampant in not only Tehran and Washington, but Riyadh and Jerusalem as well. Future negotiation break-downs cannot be ruled out, especially when many actors in the region will not simply acquiesce to Washington returning to the JCPOA. 

Conclusion 

Having not forgotten the painful effects of the United States’ withdrawal of the JCPOA, combined with deep-rooted political uncertainties and continued economic and reputational risks, foreign firms' en-masse return to the Iranian market will be limited.