European shipping lines are likely to adopt a cautious approach over a possible return to the Iran market in the event of a lifting of sanctions, a leading market analyst has told Lloyd's Loading List.com.
A preliminary deal reached earlier this month on the Islamic republic's nuclear development programme has triggered optimism that the lifting of trade sanctions is now in sight.
European shipping lines are likely to adopt a cautious approach over a possible return to the Iran market in the event of a lifting of sanctions, a leading market analyst has told Lloyd's Loading List.com.
A preliminary deal reached earlier this month on the Islamic republic's nuclear development programme has triggered optimism that the lifting of trade sanctions is now in sight.
But Michelle Berman, head of operational risk at BMI Research, said that unlike their Asian counterparts, European companies, may be holding back due to issues concerning reputational risk.
“Although many sanctions still remain in place, the maritime sector saw a roll-back in 2014 and the sector has already benefited with shipping companies starting to return to Iran,” she said. “Asian container lines have been quick off the mark among them, Wan Hai and PIL.”
But she highlighted that even though some of the sanctions were removed last year, uncertainty remained. “This led to some shipping companies toning down their risk appetite to break into Iran again for fear of having to exit the country a few months later if sanctions were re-introduced,” Berman observed
She underlined that sanctions had “dramatically impacted” the import of goods into Iran. “In the maritime sector, BMI Research estimates that in 2012 and 2013 container throughput at the port of Bandar Abbas declined by 29% and 25% respectively,” Berman said.
Maersk Line stopped all port calls to Iran in October 2012 as the pressure of western sanctions on the Islamic republic mounted. In a statement at the time it said: “Maersk Line will maintain a dormant business entity in Iran and will look to resume business should the sanctions regime be eased.”
Asked by Lloyd's Loading List.com whether the line was ready to re-activate operations in Iran and resume port calls in the country if the nuclear deal was ratified, a spokesman quoted a Maersk Group statement: “In the event of lifting of international sanctions, Iran will have great potential for new commercial business activity.”
However, the statement sounded a note of caution: “Any decision on engagement from our side – in the energy or transport business – would have to await full clarity of the sanctions repeal.”
One western media report claimed the preliminary deal on Iran’s nuclear programme "will fire a starting pistol on a stampede of western business interests into a potentially vast untapped market." At the head of the queue are oil and gas companies but opportunities are also there to seize in the aerospace and automotive sectors, as well as in heavy industry.
Berman commented: “Iran is important to western exporters but not vital. The current interest in the country stems from the potential for companies to return to a market that is developing from a relatively low base and so is offering growth opportunities. As with other states that 'have come in from the cold,' investors will be keen to get in early and gain a first mover advantage.”
She continued: “A further decrease in sanctions could create an impetus for more logistics firms to return or break into Iran. As some sanctions on the maritime sector were rolled back in 2014, shippers in Iran are already able to deal with forwarders. The potential for greater competition in this sector, as Iran shrugs off its pariah status, would no doubt be welcomed as transport costs would likely decrease,” she concluded
Discussion about this post