View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Comment
January 15, 2016

COMMENT – Iran on sanctions end brink as suppliers prepare

As I write this, the world could be just hours away from witnessing the end to one of its most extraordinary and long-running geopolitical sagas – the enduring conundrum that is Iran.

As I write this, the world could be just hours away from witnessing the end to one of its most extraordinary and long-running geopolitical sagas – the enduring conundrum that is Iran.

For almost all my life I have never known anything than an Iran bristling with unbridled hostility, glaring suspiciously at the decadent West, who through its own prism of ingrained stereotypes, imagines Tehran manically enriching uranium to develop nuclear weapons.

Both positions may or may not hold a grain of truth, but what is irrefutable is the yearning desire of ordinary Iranians to be free of the sanctions yoke, which has stalled the economy for decades and which has seen its, predominantly young, population, cast envious eyes out of Tehran, much in the same way those in the Soviet Union and its satellites would long for Western goods, despite being endlessly told by their leaders the Communist system was infinitely preferable.

Distilling that yearning down to the automotive sector, I have long had the impression crackling down scratchy telephone lines from Tehran, that ordinary Iranians engaged in business simply want to earn a crust in the same way as anyone else and have access to quality products, an enrichment of an altogether different kind.

I’ve never been to Iran but one Western supplier association chief executive told me of the ageing car parc and the overwhelming smell of diesel in the air. Said in isolation, those could be two relatively unremarkable facts, but together, they are a powerful shorthand for what some of living in modern Iran is like.

I’ve encountered that smell before – years ago in a much more polluted Moscow than now – but its presence in Tehran – and presumably elsewhere – is indicative of just how far the country is being stymied by the – clearly very effective – sanctions.

The negotiations are still truly fragile though. A significant rump of hardline Republicans – and who knows maybe a sprinkling of Democrats too – have staked their line in the sand on The Hill and no-one – certainly not in Tehran – will quite believe it until Western auto parts – not just French – start entering Iran – and as the country is allowed to open its oil taps even more with the concurrent snowball effect on oil prices that will surely have.

Everyone is holding their breath – Iran is undoubtedly a regional superpower and although it is currently embroiled in a major diplomatic spat with Saudi Arabia – its working population just wants to get on.

Any deal will be forensically scrutinised by London, Paris, Tel Aviv and Washington, while it will almost certainly carry a major amount of checks and balances, the old “Trust and Verify” stance so beloved of President Ronald Reagan in his celebrated nuclear arms fireside chats with the last leader of the Soviet Union, Mikhail Gorbachev.

Make no mistake, those sanctions hurt in a way Russia has, so far, managed to escape and from an automotive perspective, it is spare parts which are extremely problematic.

“Sanctions have made a lot of limitations for us – we believe many difficulties and problems will be resolved and parts manufacturers will improve their supply [once they are lifted],” Iranian Auto Parts Manufacturers Association (IAPMA) CEO, Sasan Ghorbani tells me from Tehran.

“Government policy is to support joint ventures and European companies have greater chance – in my point of view many cooperation agreements will be signed. Most European companies and related associations are waiting for sanctions to be lifted – with this in mind that mutual cooperation will expand.”

There’s a certain reluctance there I feel to be too triumphant – there have simply been too many false dawns for untramelled celebration – but nonetheless there’s a feeling abroad an historic deal may be close.

So close in fact you can feel its breath on your neck and to that end there couldn’t be a more apposite time for the forthcoming Iran Automotive Industry Conference in Tehran, which will now assume vastly more importance as Western suppliers jostle for position.

They’ll have to deliver a strong proposition however. France and Scandinavia were first through the auto component door, although, magnanimously , the Iranian supplier body CEO did not rule out working with British and American companies, an almost unimaginable scenario until only recently.

“We believe UK and US possess fine automotive and parts manufacturing industries and we can make a good cooperation with these two countries, especially in technological parts,” notes Ghorbani.

“High-tech parts and components are our principal problems. Iran has great infrastructure; but sanctions caused us to lag behind [the] advanced automotive world in technological fields. But lifting sanctions can compensate for this problem.

“For the moment more than 200,000 employees work directly in [the] auto parts industry and this number could increase by increment in car manufacturers’ production volume.” [should sanctions ease].

Just to illustrate however, the precarious nature of negotiations, up pops one of those periodic incidents, which keeps Iran, just like Russia, occupying almost permanent residency on global front pages.

A group of US Navy sailors – on what looks like a fairly well-armed small boat – was apprehended in Iranian waters this week – an incident with remarkable similarity to a one involving the British Royal Navy a few years ago.

Except the Brits were held for many days rather than the fate which befell their American counterparts who were swiftly released within hours of their ‘detention’ – Iran no doubt acutely aware it needed to smooth diplomatic feathers ahead of the sanctions deal being inked.

“I want to express my gratitude to [the] Iranian authorities for their cooperation ‎in swiftly resolving this matter,” said US Secretary of State, John Kerry. Who on earth could have predicted such a comment from a US foreign secretary?

Cooperation will be the key to any future automotive dealings with Iran – it is up to the West to play catch-up with those canny Scandis and French who were prescient enough to beat a path to Persia.

This is an ancient civilisation desperate to enter the 21st century – yes there will have to be forensic checks and balances and no-one’s pretending Tehran is a perfect political system – but if they are trusted and verified the automotive landscape could radically change in very short order for Iran – and its people.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Auto