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As the new US sanctions against Iran begin to take effect this month, Western companies still present in the country are facing new hurdles in a market that is both attractive and hard to break.
Over the last two decades, many Western companies have quietly rooted in the Islamic Republic through food, medical and other exemptions exempted from the sanctions imposed by the US Treasury Department. Coke and Pepsi are therefore available everywhere in a market of about 82 million people. Iranian hospitals use ultrasound and MRI machines manufactured by
General Electric
Co.
And the Iranians are able to turn to drugs made by
Pfizer
Inc.
and
AstraZeneca
PLC to treat their diseases.
A leader who is mainly interested in Iran for a large multinational consumer goods company said the market was promising before President Trump removed the United States from the Iran nuclear deal in May.
"I considered [Iran] to be the next big cause because of the population and the size of the country, "said the executive. "Everything was needed, a lot of great things were expected and huge plans were put in place. People have built teams and offices to meet the needs of the business. "
As the United States reimposed economic sanctions on its country, Iranian President Hassan Rouhani said Iran would circumvent these measures and "make America regret" to restore them. Photo: AP
The Trump administration has made it clear that it still has no intention of targeting trade in food and medical products. But doing business in Iran, even for Western companies operating legally there, has become much more difficult as new sanctions have closed critical financial channels.
Among the entities hit by US sanctions, Monday were 50 Iranian financial institutions that are now banned from providing crucial financing for trade. The Belgium-based Swift banking messaging system cut ties with Iranian lenders, making international transfers virtually impossible.
Businesses faced the same kind of obstacles when US sanctions tightened before the 2015 nuclear deal. Many have found ways to trade and deal with Iran indirectly, either through the nuclear industry or the US. intermediary intermediaries, either by using a loophole now closed allowing non-US subsidiaries of US companies to escape US jurisdiction. Given the scale of the new sanctions, it is not clear how these companies will adapt this time.
Novo Nordisk
A / S, the Danish pharmaceutical giant, said that it was too early to discuss the impact on the company's new insulin product factory, one of the first investments European pharmaceuticals in Iran after the nuclear deal in 2015.
A spokeswoman acknowledged, however, that the limitations of the company's banking options "will make managing our business more difficult than before."
Other pharmaceutical companies entering the market could face similar hurdles. AstraZeneca, a UK-based company, reported profits of $ 7 million last year on sales of $ 18 million.
GlaxoSmithKline
,
the British pharmaceutical giant announced a profit of 4 million pounds sterling ($ 5.3 million) and 12 million pounds of sales last year. Both companies declined to comment.
Nestlé SA, which employs about 800 people in Iran and operates two factories producing children's cereals and water, does not seem to want to withdraw from the market, despite the new challenges.
"Sanctions are affecting business operations in Iran," a spokesman said. "We are working to mitigate these effects so that we can continue to meet the basic needs of the Iranians."
A
Coca Cola
The spokesman said the company has been operating legally in Iran for nearly two decades, selling beverage concentrate to a bottler, monitoring quality and protecting brands.
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Coca-Cola "and its trading partners around the world have long been committed to developing our markets in the long term," he said. "The company remains authorized by [the U.S. Treasury] maintain these limited activities in Iran, "he added, refusing to specify how it works.
PepsiCo
Inc.
holds a US Treasury license allowing him to sell the concentrate to an independent bottler and is not affected by the penalties, according to a person familiar with the matter.
Many international sanctions against Iran were lifted in early 2016 as a result of the nuclear deal negotiated between Iran and six world powers the year before. In exchange, Iran agreed to put a stop to its controversial nuclear program – measures that Mr. Trump and other opponents deemed inadequate as they did not stop Iran's ballistic missile program or reduce its participation in Syria, Yemen and Lebanon.
When Trump announced the US withdrawal from the Iran nuclear deal, some Western companies have begun to re-evaluate their presence.
In the United States, Americans can not trade with Iran unless they have Treasury exemptions or general exemptions for food and medical products. Non-Americans can be penalized or banned from the US financial system if they deal with hundreds of designated entities.
In Europe, where Mr Trump was largely opposed to the exit of the nuclear deal, politicians sought to protect their businesses. The European Union is trying to create a special payment channel for trade with Iran that bypasses the sanctions imposed by the United States and allows European countries to continue doing business with the Iranians.
For some Western firms whose relations with Iran were mainly export-oriented, trade had already been so weakened by Iran's economic difficulties that the new restrictions imposed by the United States would not major impact.
The sharp loss of value of the Iranian rial forced Del Monte, based in California, to stop exporting packaged food to Iran several months ago, as his products suddenly became much more expensive.
"They are very careful not to buy food from outside," said Muhammad Adil Imtiaz, Del Monte's sales manager in Dubai, about Iranian buyers. "For consumers who buy any product, not just food, but clothing and electronics, prices have completely changed on the shelves."
-Jennifer Maloney in New York and Brian Blackstone in Zurich contributed to this article.
Write to Asa Fitch at [email protected] and Denise Roland at [email protected]
