Iran is rejoining the global economy—
and on its way to becoming a project hot
spot. With the lifting of international
economic sanctions this year following
a landmark nuclear agreement, a project
bonanza across a wide swath of industries is emerging to meet the country’s
pent-up demand. The nuclear deal gives
Iran access to foreign investment—which
means organizations around the world
are eyeing opportunities to help finance
and execute major projects.
“Huge opportunities are available for
foreign investors,” says Saied Yousefi,
PhD, PMP, assistant professor of project
management, University of
Tehran, Tehran, Iran.
For instance, the German
tunneling company Herrenknecht has
said that if, as expected, Iran’s government puts up new projects for tender, it
will jump on them. The sectors with the
biggest potential seem to be oil and gas,
mining and transportation (see sidebar,
“Three Sectors to Watch”). Iran has the
world’s fourth-largest oil reserves and
the second-largest gas reserves. Anglo-Dutch behemoth Shell, Italy’s Eni and
Norway’s Statoil have expressed interest
in new project opportunities in Iran, and
France’s Total signed an energy deal with
the country early this year.
But “there is more to Iran than oil and gas,”
says Erik Arvnes, director, PMI Global Executive
Council member KPMG Forensic Services, Oslo,
Norway. Automobiles are a growth area, he notes,
and the country is already the largest producer of
vehicles in the region. Even the seafood industry
is looking to get in on the action. A US$100 million project to build caviar farming and production
facilities aims to restore Iran’s former position as
the world’s primary exporter of the luxury food.
Proceed With Caution
Yet foreign organizations interested in capitalizing on new Iranian opportunities must
conduct careful due diligence to determine
the appropriate local and investment partners
prior to entry, Mr. Arvnes says. For U.S.-based
organizations, risks remain high. While their
foreign subsidiaries can now engage with Iran,
U.S. organizations still have to navigate remaining U.S. sanctions and clear many regulatory
hurdles. And the risk of a future U.S. president
reneging on the deal makes U.S. executives
wary of long-term projects.
Any foreign project sponsor must also weigh the
risk of “snapback” provisions that would reinstate
economic sanctions if Iran violates the terms of
the pact, effectively pausing or killing projects.
“This is a risk that organizations have to consider
in their contracts and when structuring any investment,” Mr. Arvnes says.
There’s yet another major risk to contend with
in the future, too. “Project management is fairly
new here in Iran,” Dr. Yousefi says, adding that
projects in Iran regularly struggle to come in
theEdge With a population of 8. 3 million, Tehran is the largest city in Western Asia.
project to build
caviar farming and
to restore Iran’s
as the world’s
of the luxury food.