Open for Business? France Looks to Tehran

Anxious to discover what business opportunities a market of 76 million people might present – and before the ink could dry on official agreements between the West and Iran – representatives from 120 French companies made a three-day trip to Tehran last week. 

As the first sanctions were lifted, France’s business community was eager to be the first to set foot in the Iranian market, not even waiting for the next round of talks on Iran’s nuclear program, scheduled to take place in Vienna on 18 February. The visit was short enough not to anger diplomats, but long enough to secure a few key meetings that could determine the future of French commercial opportunities in Iran. 

A football club, Auxerre, from the town of the same name in central France, was part of the delegation, which was organized by France’s largest union of employers, Medef. Smaller delegations from Italy, Germany, Austria and Turkey had travelled to Iran earlier but, according to the Islamic Republic News Agency (Irna), the French delegation was the largest foreign economic and commercial delegation to travel to Iran for 30 years.

There were hopes among the delegation that Iran would soon be open for business, as long as the Islamic Republic agrees to curb parts of its nuclear program in exchange for a gradual end to sanctions. Deputy president of the international branch of Medef, Thierry Courtaigne, told Agence France Presse (AFP), “Big groups or small and medium enterprises are coming [to Iran] for different reasons. Some are coming to get their files updated or to create contacts. One cannot sign deals overnight.” A “speed date” was organised to help the group make contacts with local partners, along with a tour of industrials sites. Deputy minister of Oil Ali Majedi addressed the delegation on 4 February,  underlining the need for $230 billion to be injected into the country’s gas and oil sector required in order for it to develop and increase production.

A Lot to Gain

French business interests have a lot to gain from the easing of sanctions, which have been imposed on a gradual basis since 2005, placing pressure on Iran’s government to change its nuclear policy. Last November’s talks in Geneva sent a message that Iran might cease to be a no-go zone for western companies. 

Even before the Geneva summit, interest in Iran’s business potential was on the increase. A number of universities in Paris hosted conferences on Iran; organizers were surprised by the huge response they received. “They were packed with business people,” said one organizer. “It shows how much French companies are interested in the opportunities offered by the Iranian economy.” Iran’s younger generation, seen as dynamic and well educated, is particularly appealing to the French business community. The stakes are high for France, which has been bogged down in recession since 2008 and seeks to expand its reach outside a depressed Eurozone. 

“Before Sarkozy took office in 2007, France was Iran’s first industrial partner,” wrote Sébastien Regnault in Le Monde. Prior to the sanctions, car manufacturer Peugeot sold more than 450,000 cars annually in Iran, while Renault sold more than 100,000 cars there in 2011 before pulling out, according Associated Press. But from 2005 to 2014, the commercial dealings between the two countries dropped by 70 per cent, from 2 billion euros to 800 million. Iran used to be the first market in the Middle East for French exports, but all that collapsed in 2007, when President Nicolas Sarkozy severely reduced economic cooperation between the two countries as a response to Iran’s nuclear policy.

The Biggest Market Outside Europe

After 35 years in Iran, Peugeot pulled out virtually overnight in February 2012. At the time, Iran was the company’s biggest market outside Europe. French news reports about the sudden and costly decision focused on the loss of jobs and the pressure US-owned General Motors (GM), one of Peugeot’s major partners, placed on the company. GM is closely affiliated to the “United Against Nuclear Iran” lobby.  Oil company Total continued its operation until 2012, when financial transactions became impossible due to the fact that SWIFT network of bank codes no longer supported transfers coming out of or going into Iran.

French companies must now demonstrate their determination to re-establish the business position they held in the early years of this century. They also have to overcome diplomatic tensions between Paris and Tehran. French minister of Foreign Affairs Laurent Fabius has taken a strong stance against Iran, leaning more towards an alliance with Gulf countries and Saudi Arabia. 

“French corporates still have a kind of network in Iran,” remarked Dr Thierry Coville, an Iranian expert at the Institute of International and Strategic Relations in Paris and professor at Novancia. “Francophile sentiments remain high” in Iran, he added. “The trip was not supported by the French authorities. It was a real initiative from  Medef and a good, timely one. Since 2007, French business have disappeared from the Iranian market and one should not lose time to gain back what was lost,” Coville continued.  

Building business in Iran takes time. Companies must create networks and establish relationships. Even if in the past some companies have had a comfortable position in Iran, their representatives are aware that they will not necessarily be welcomed as old friends. The void they left has rapidly been filled. For example, Korean car manufacturers like Daewoo or Kia have recently entered Iran.

“The competition is going to be fierce,” explained one analyst. Iranian partners did not appreciate or understand why French companies left the country. “The Iranians are pragmatic,” the analyst added. “What assurance do they have that the French will remain?” What if in 10 years the Foreign Office asks them to once again cut commercial ties?

French companies will have to convince their Iranian business partners – who saw Italian and German companies continue to operate up until the latest set of financial sanctions – that, this time around, they are in for the long run. They will have to convince them they will not disappear as soon as the “Ministry of Foreign Affairs tells them to go”.

According to Middle East specialist Georges Malbrunot in the daily newspaper Le Figaro, prior to the delegation’s flight to Tehran on 4 February, French diplomats delivered a discreet briefing to the Medef delegation at the Ministry of Foreign Affairs. An economic attaché was sent to Tehran in January.

US Reaction

The visit prompted a call from US Secretary of State John Kerry to his French counterpart, Laurent Fabius, during which he was said to have expressed considerable concern. In a testimony to the Senate Foreign Relations Committee, Wendy Sherman, Undersecretary of State for political affairs, said that the message conveyed by Kerry and other US officials was that such trade visits are “not helpful”.

The trip made headlines in France, as did the reaction from the United States. Medef remained discreet: despite asking them for a quote about the delegation, my calls were not returned and a request for an interview went unanswered.

The French Ministry of Foreign Affairs responded to American criticism by underlining the fact that the Medef visit “was exploratory and respectful of France’s international commitment”. French Finance Minister Pierre Moscovici was blunt: “One should not consider this visit as a sign of leniency but as a bet on the future that will be secure by negotiation and inflexibility,” he said, adding that if one day “Iran was to change its attitude, then, everyone is aware there will be commercial and economic opportunities for all countries."

The offices of French CEOs will be closely following negotiations in Vienna, with much commentary to follow. And air travel between Paris and Tehran, particularly among the business community, is bound to see an increase in coming weeks.