Looming Sanctions Halt Italy’s Growing Business in Iran

23 Luglio 2018
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From its headquarters in Calabria, the poorest, least-developed region in Italy, Gruppo Ventura looked out on the world and spotted a potentially lucrative growth opportunity: Iran.

The family-owned company installs railroad tracks. The Italian economy was sluggish, while Iran was poised to develop rapidly, reads a New York Times article. Excerpts follow:

The deal that Gruppo Ventura struck last year with an Iranian partner was modest, but the possibilities seemed big. Then, President Trump withdrew the United States from the Iran nuclear deal, dealing a blow to companies across Europe.

“We were expecting to expand in Iran, build rails,” said Gruppo Ventura’s chief financial officer, Alessandro Ventura. “We are not expecting to do these things anymore.”

Trump’s decision to walk away from the Iran nuclear deal threatens to cost European companies billions of dollars in lost sales, with German, Italian and French players especially exposed. The reimposition of sanctions on Iran in August and November stands to limit the flow of its oil to world markets. This prospect has lifted fuel prices, applying pressure to European economies.

Before the 1979 Islamic Revolution in Iran, Italian companies were key players there, building a port at Bandar Abbas alongside the Persian Gulf. After the revolution, and before the advent of international sanctions, Italian energy and construction companies were a significant presence.

Once the administration of former US president, Barack Obama, and leaders of other world powers struck the nuclear deal with Iran three years ago, Italy saw a chance to reclaim its perch.

Iran is a land of 80 million people in need of upgrades to its electrical grid, ports and transportation systems.

Last year, Italy exported more than €1.7 billion ($2 billion) worth of goods to Iran, up from €1.2 billion in 2015, according to the European Union. Only Germany exported more, sending nearly €3 billion worth of goods to Iran.

Invitalia, an Italian government agency that promotes trading opportunities, created a company focused on expanding investment in Iran. The new entity was authorized to provide loan guarantees to support Italian ventures in Iran.

Invitalia was soon inundated with proposals from Italian companies. The agency was mulling which to back when the United States announced the resumption of Iran sanctions. The Trump administration gave companies three to six months to wrap up activities there.

“This project is on pause,” said Domenico Arcuri, chief executive officer of Invitalia. “We are waiting for the situation between the United States, Europe and Iran to be clarified. In this condition, these projects will be suspended for a long time.”

American sanctions not only bar domestic companies from doing business in Iran but also threaten foreign businesses with being frozen out of the American financial system. As the American dollar remains the dominant means of global exchange, that prospect has halted most transactions.

Before Trump’s decision, Giorgio Meniconi, owner of a small factory in Tuscany, was preparing plans to expand in Iran. His company, Tecon, makes a tool used to slice leather into shoes, jackets and bags.

For years, counterfeit versions of his product have circulated in Iran, the handiwork of Chinese factories. He took the nuclear deal as impetus to register his company trademark in Iran and forge a relationship with a local distributor.

But last month, the distributor called and canceled the deal. Since Trump opted to reinstate sanctions, Iran’s currency has plunged against the euro, making Tecon’s products too expensive.

“I had great hopes for Iran, because I saw it as a gateway to other markets in Central Asia,” Meniconi said. “The hopes we were building were shattered.”

In the years before Gruppo Ventura secured its Iran venture, Ventura traveled there some 20 times. In March 2017, he signed a €2 million contract (about $2.3 million) to service a section of rail outside Tehran.

He shipped two locomotives used to tamp down the rocks below railroad tracks.

In August, Ventura stood at the Iranian port of Bandar Abbas, watching a crane hoist the locomotives onto the docks.

Now, those machines are effectively marooned, the business halted. Gruppo Ventura has lost its appetite for adventurous expansion.

“We are wary of going into markets that America dislikes, because we never know what they will say,” said Ventura, the chairwoman.

Five company technicians dispatched to Iran to maintain the locomotives have returned here, to the company’s warehouse.

“It was a beautiful thing that our company would go,” the head mechanic, Renato Tocci, said. “Our hope was that our business would grow. Now, it’s a time where everything is stalled.”

Source:Financial Tribune

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Hooman Mirmohammad sadeghi

Business Development Consultant For Iran & Italy

  

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