This update aims to provide a brief overview of key developments which have occurred in Iran during the past month and to highlight areas of future interest. In particular, the update covers notable developments in both the political arena and key economic sectors.
US senators introduce bipartisan bill to tighten sanctions on Iran
According to reports, a bipartisan group of US senators announced a bill on 23 March 2017 designed to impose tougher sanctions on Iran. The bill would set mandatory sanctions against anyone identified as being involved with Iran's ballistic missile programme, as well as applying sanctions to the Islamic Revolutionary Guard Corps. Aides have reportedly stated that the bill is expected to pass due to the high level of support it has within the Senate.
Iranian and Russian Presidents meet in Moscow to strengthen economic ties
Iranian President Hassan Rouhani arrived in Moscow on 27 March 2017 for a two-day summit in Moscow. President Rouhani is meant to meet with his counterpart, Russian President Vladimir Putin, during the summit. The two presidents have reportedly arranged to discuss the expansion of trade, economic and investment ties between their nations, with a particular focus on the potential for large-scale joint energy and transport infrastructure projects. The Iranian Deputy Foreign Minister Ebrahim Rahimpour has stated that Russia and Iran are expected to sign a number of memoranda of understanding during the summit to further strengthen economic, consular and cultural cooperation between the two countries.
Developments in key economic sectors
Oil and Gas
Hyundai Engineering signs US$3.2 billion deal for Iran oil project
According to reports, South Korean firm Hyundai Engineering Co. has signed a deal with Iran's Ahdaf Investment Company worth US$3.2 billion to invest in the second phase of the Kangan oil production and refinery project in southwest Iran. The second phase of development will reportedly involve the construction of four oil production plants at the Kangan site, but remains subject to Hyundai Engineering successfully securing funding for the next phase of the project within the next nine months.
Total plans significant investment in Iran's gas sector
According to reports, Total is seeking to make two multi-billion dollar investments in the Iranian gas sector. Total is reportedly in talks to buy a multi-billion dollar stake in the partially built LNG export facility, Iran LNG. The French company is reportedly seeking to acquire the site at a discount to the pre-sanctions price in exchange for reviving the project, which has stalled since 2012 as a result of US sanctions that were imposed on Iran. Total is also reportedly seeking a 50.1% stake in a US$4 billion development project in Iran’s giant South Pars gas field, which could potentially be used to supply the Iran LNG export facility. Total reportedly signed a heads of agreement with the National Iranian OilCompany ("NIGC") in November 2016 to develop the giant gas field, but the details of Total's proposed equity stake and the financial scale of the project were only publicly disclosed this month.
Iran launches five gas pressure stations
According to reports, NIGC launched five gas pressure station facilities on 9 March 2017 that, once operational, are expected to increase NIGC's gas delivery capacity from the current level of 60 million cubic meters of gas per day to 110 million cubic meters of gas per day.
Construction begins on Bushehr-2 nuclear power plant
According to reports, the construction of the second and third reactors at the Bushehr nuclear power plant began on 15 March 2017. The second and third reactors will reportedly have a combined capacity of 2,100 MW and are expected to become operational in 2024 and 2026 respectively.
Iran launches new wind farm
According to reports, Iran's Energy Minister Hamid Chitchian inaugurated a new wind farm in Iran's Qazvin province on 12 March 2017. The wind farm was developed by Iran's MAPNA Group and reportedly has a capacity of 55 MW.
Iran struggles to convince the Bank of England to open clearing accounts
According to reports, the Bank of England has rebuffed Iran's request to directly open clearing accounts with the British Central Bank. The special clearing accounts were requested for Iran's Central Bank and UK subsidiaries of Iranian banks to provide the parties with the ability to make and receive payments in sterling; a service that international commercial banks based in London have so far been unwilling to offer to Iranian institutions, as fears of falling foul of US sanctions persist.
France to encourage banks to "normalise" relations with Iran
The French Economy Minister Michel Sapin has reportedly encouraged French banks to overcome fears of breaching US sanctions and normalise their relations with Iran. According to reports, Mr Sapin stated that the French government would work with French banks to improve their understanding of the US regulatory regime and to find ways to strengthen economic ties between France and Iran without being in contravention of US rules.
Iran receives third Airbus jet
IranAir has reportedly taken delivery of the third of 100 Airbus jets it ordered following the lifting of US sanctions last year. According to reports, the long-haul A330-200 landed at Tehran's Mehrabad airport on 25 March 2017.
Iran signs US$1 billion deal to develop zinc mine
The state-owned Iranian Mines and Mining Industries Development and Renovation Organisation has announced a US$1 billion deal with a consortium of private investors to develop Mehdiabad, which is one of the largest zinc mines in the world. According to reports, the mine is expected to become operational in four years and produce 800,000 tonnes of zinc concentrate per year.
China's ZTE pleads guilty and settles US sanctions case for nearly US$900 million
According to reports, Chinese telecom equipment manufacturer ZTE Corp has agreed to plead guilty and pay a fine of nearly US$900 million to settle its US sanctions case. ZTE Corp reportedly conspired to violate US sanctions against Iran by purchasing US telecoms components, incorporating them into ZTE products and then illegally exporting them to Iran.
Russian and Iranian trade up 80% in 2016
The volume of trade between Russia and Iran reportedly increased by 80% in 2016 compared to figures from the previous year.
Russian Firm to Assemble Vehicles in Iran
According to reports, Russian carmaker UAZ plans to open a vehicle assembly plant in Iran. The Russian firm reportedly plans to open the facility in 2018 to assemble the UAZ Patriot, UAZ Pickup and UAZ Cargo vehicles in partnership with the Iranian company Tavan Khodro Jey.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021