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.
Iran's May presidential election gets underway
Campaigning has officially begun for the Iranian presidential election. According to reports, the Guardian Council (the regulatory body that vets political candidates) approved six candidates to seek election. The two frontrunners are the incumbent moderate President Rouhani and the conservative cleric Ebrahim Raisi. The four other candidates are Iran's first Vice President Eshaq Jahangiri, former conservative culture minister Mostafa Mirsalim, former pro-reform Vice President Mostafa Hashemitaba and Tehran Mayor Mohammad Bagher Qalibaf. Former President Mahmoud Ahmadinejad, who had reportedly registered as a candidate, was not permitted to run. The election will take place on 19 May 2017.
Trump administration certifies Iranian compliance with JCPOA
According to reports, the Trump administration has notified the US Congress of Iran's compliance with the terms of the 2015 Joint Comprehensive Plan of Action (the "JCPOA"). However, this notification also stated that the JCPOA will be reviewed to assess whether the agreement remains in the national security interests of the United States. During a press briefing on 19 April 2017, the White House Press Secretary, Sean Spicer, indicated that this review would take place within the next 90 days. In addition, it is reported that, in order for the sanctions relief granted pursuant to the JCPOA to continue, the Trump administration will need to renew certain statutory waivers in respect of the U.S. nuclear-related secondary sanctions (and this is expected to occur in mid-May).
US Senate may consider sanctions bill
On 2 May 2017, the Republican chairman of the Senate Foreign Relations Committee, Bob Corker, stated that the Committee expects to pass new Iranian sanctions legislation by "the end of the current work period," likely meaning by the end of May. Sen. Corker's proposed legislation, the "Countering Iran's Destabilizing Activities Act of 2017," would authorize new sanctions targeting Iran's ballistic missile programs, as well as the activities of the Iranian Revolutionary Guard Corps.
EU extends human rights sanctions on Iran
According to reports, the European Union has extended human rights sanctions against Iran until April 2018. The sanctions were reportedly imposed because of alleged severe human rights violations in Iran. The restrictive measures reportedly include a travel ban and asset freeze on 82 Iranian individuals and one entity, as well as a ban on exports to Iran of equipment for monitoring telecommunications and other technology that the EU believes may be used for internal repression in Iran.
Developments in key economic sectors
Oil and Gas
Tensions mount as Indian company seeks to invest in Farzad B gas field
According to reports, ONGC Videsh Ltd., the overseas arm of India's biggest oil and gas explorer, recently submitted a revised plan to the Iranian government for its US$3 billion development proposal for the Farzad B gas field. It has been reported that Indian authorities have grown frustrated that the right to develop the giant gas field has not yet been awarded to the Indian firm and in response have reportedly announced that Indian state refiners will cut oil imports from Iran by a fifth in 2017-18.
Iran doubles oil exports to Turkey
According to reports, Iran doubled its oil exports to Turkey in the month of January (as compared to the same month last year). The Turkish energy market regulator reportedly stated that in January 2017, Iran exported around 834,000 tons of crude oil to Turkey, in contrast to the 406,894 tons exported in the same month of last year.
Total and Iran sign South Azadegan agreement
Total have reportedly signed an agreement with the Iranian government to develop the South Azadegan oil field in Iran. According to reports, the Iranian Oil Minister Bijan Zangeneh confirmed the deal. However, the parties have reportedly agreed to keep the terms of the agreement confidential.
Iran and Russia to jointly build two new nuclear power plants
Iran's Energy Minister Hamid Chitchian has reportedly announced that the Atomic Energy Organization of Iran is set to begin the construction of two new 1,000 MW nuclear power plants, with the assistance of Russian experts.
Iran and Chinese firms sign contract to redesign nuclear power plant
According to reports, in accordance with the international nuclear deal entered into by Iran in 2015, the Atomic Energy Organization of Iran and Chinese firms have signed an agreement to redesign the Arak nuclear reactor in Iran. The redesign will reportedly reconfigure the 40 MW heavy water reactor, so it can no longer yield fissile plutonium usable in a nuclear bomb.
Iran offering incentives to renewables investors
According to reports, the president of Iran’s Organisation for Investment, Economic and Technical Assistance of Iran, Mohammad Khazai, stated at the recently held Iran-European Business Forum on Sustainable Energy that foreign and private domestic companies investing in renewables projects could receive certain tax incentives (including tax holidays of 5-13 years) and that the Iranian government would be prepared to enter into power purchase agreements with terms of 20 years for these projects. It is reported that Iran currently has installed capacity of 240 MW in renewable energy and is targeting an amount of 5,000 MW by the end of 2020.
Iran and Pakistan sign banking agreement
According to reports, the State Bank of Pakistan has signed a banking and payment arrangement with Iran’s central bank, Bank Markazi Jomhouri Islami Iran, to streamline trade transactions between the countries. The agreement reportedly seeks to provide a trade settlement mechanism between the two countries with the mechanism to be used for the payment of trade conducted via letter of credit. The details of the mechanism will be released at a later date.
Iran's Aseman Airlines signs deal to buy at least 30 Boeing jets
Boeing has reportedly entered into a memorandum of agreement with Iran's Aseman Airlines under which the Iranian airline will purchase 30 Boeing 737 MAX jets, with options to acquire a further 30 planes. According to reports, the primary deal for 30 jets will be worth US$3.74 billion at list prices (although, airlines typically pay less than the list price on bulk orders).
IranAir and ATR sign aircraft deal
According to reports, ATR has announced a deal with IranAir under which the French-Italian airplane manufacturer will sell 20 ATR-600s (a twin-propeller aircraft) to IranAir. The deal is reportedly worth US$536 million at list prices (though it is expected IranAir will have negotiated a significant discount to this price).
RZD International signs €1.2 billion Iran electrification deal
Russian railways business RZD International has reportedly entered into a contract worth an estimated EUR€1.2 billion with the Islamic Republic of Iran Railways to electrify the 495 km route from Garmsar in Semnan Province to Incheh-Borun on the border with Turkmenistan. According to reports, RZD International's work will include the 25 kV 50 Hz electrification and track, signalling and telecoms enhancement in order to increase capacity on the route, as well as the supply of maintenance vehicles.
US accuses Turkish banker of breaching Iran sanctions
According to reports, US authorities have arrested Mehmet Hakan Atilla, a senior official at Turkiye Halk Bankasi (Halkbank), a bank owned by the Turkish government, accusing him of conspiring to evade US sanctions against Iran. The arrest comes a year after the arrest of Reza Zarrab, the alleged co-conspirator. The US authorities reportedly allege that Mr Atilla and Mr Zarrab conspired to buy and transfer billions of US dollars' worth of gold to the government of Iran whilst it was under US sanctions and created false documents to make the gold transactions appear to be food, in order to fall within the humanitarian exceptions to US sanctions law. According to US investigators, the gold transfers allegedly allowed Iran to be paid in kind for natural gas sold to India and Turkey.
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