FOCUS: Resurgent Iran sends waves through marine sector
On July 14th, Iran and the P5+1 group of nations (US, UK, France, Germany, Russia and China) sealed a historic nuclear accord after weeks of negotiations that culminated in a days-long session of talks in Switzerland. The move puts Iran in position to recover trade volumes and re-establish itself as a major maritime player and trade partner in the Middle East and, as we reported in May, is expected to have a major impact on the Middle East maritime sector (see Volume 3, Issue 5).
Indeed, the impact on the local industry was felt within hours of the talks concluding, with an announcement from the US State Department that 16 Iranian shipping executives, including IRISL managing director Mohammad Hossein Dajmar, had been delisted from the United States’ sanctions list. In addition to the Islamic Republic of Iran Shipping Lines (IRISL), Iran’s primary port operator, Tide Water, was also delisted from the US list of companies designated for sanctions and assets freezes.
According to state media, 132 shipping companies are on the list in total. Further easing of sanctions will be decided by the US Congress in the coming weeks, when politicians consider the details of the nuclear accord reached between Iran and the six world powers. However, in anticipation of further delisting in the coming weeks, major shipping lines have moved to secure an advantageous position in facilitating cargo transfers as world powers re-establish trade with Iran.
Eleven international shipping companies have set up offices at Shahid Rajaee Port, Iran’s largest commercial port, according to Mohammad Saeidnejad, the president of Iran’s Ports and Maritime Organization (PMO). These shipping lines are primarily based in Asia, with US and European lines holding back until trade sanctions are officially dropped.
Korean carrier HMM (Hyundai Merchant Marine), resumed services to and from Shahid Rajaee Port in Bandar Abbas back in April with a total of seven vessels of 6,300-6,800 teu calling at the port on various regional loops. The two Taiwanese carriers, Hanjin Shipping and Yan Ming added Bandar Abbas to their respective route networks between the Far East and the Middle East in late July. And starting in August, the three O3 Alliance carriers CMA CGM, UASC and CSCL, will resume services to Iran.
Iranian officials are eager to re-establish relationships with major carriers. For several years, the country has had to have the vast majority of its cargo transhipped through Middle Eastern ports, adding time and expense to imports, undermining economic growth. Indeed, Diego Aponte, the president and CEO of MSC shipping line, was invited to Iran by the country's government at the same time and on the same day as the international accord with Iran was settled.
MSC was the largest container carrier in the Iranian market before the sanctions put an end to business in 2012. In January last year, however, MSC established a feeder service from Bandar Abbas Terminal 2 (Shahid Rajaee), which was the only accessible port after the EU, the US and Switzerland (where MSC is based) made it possible to a certain extent to do business with Iran once more for the trade of specific foods and agricultural products. MSC will be hoping to convert this feeder service into a direct mainliner service to reduce costs.
Maersk Group has also confirmed that it sees great potential for Iranian business, but has been more reserved in terms of providing details. The world’s largest shipping company said in a statement that Iran has “great potential” from which it hopes to benefit when a range of sanctions against the country are lifted in the coming weeks and months. “In the event of lifting of international sanctions, Iran will have great potential for new commercial business activity. Any decision on engagement from our side in energy or transport business would have to await full clarity of the sanctions repeal,” the statement added.
In terms of Iranian ports, Bandar Abbas stands to benefit most. The container port counted at least seven major shipping lines among its customers before the sanctions kicked in and Tidewater has been quick to get back in the game, releasing a statement saying that it will soon begin "serious" talks with foreign interests for new trade.
Major Middle East players, such as DP World, are among those partners. DP World is considering marine investments in Iran of up to US $1-billion, the IRNA news agency has quoted officials as saying. A delegation from the Dubai-based company, including its chairman, Sultan Bin Sulayem, and executives and British partners, visited Iran on a three-day trip to study investment opportunities a week before the nuclear deal was announced.
According to the IRNA, the delegates visited the Caspian port of Bandar Anzali, the Qeshm Island in the Arabian Gulf and Chabahar on the Gulf of Oman to assess cargo capacities. “The Emirati delegation will be examining the capacities of the three free trade zones for an investment of US $500-million to US $1-billion,” deputy head of the Chabahar Free Trade Zone Mohsen Mohammadi Moin told IRNA.
Bandar Abbas then is not the only Iranian port to benefit from the deal. Iran, once sanctions are dropped, will offer a unique transit corridor linking Russia and Central Asia to the subcontinent and the Arabian Gulf. It’s large size and stability in comparison to Iraq and Syria also makes it a good overland option for Turkish traders looking for access to Middle East markets.
Iran has stepped up trans-Caspian transit by expanding its fleet of cargo ships in Bandar Anzali and two more ports for trade with Russia, Kazakhstan and other regional countries. From the Caspian shores, a railway runs all the way across Iran to the Arabian Gulf and the Sea of Oman.
India signed a memorandum of understanding in May for development of the Chabahar Port to operate container and multi-purpose cargo ships to boost trade with the ex-Soviet Commonwealth of Independent Countries. Iranian officials say many other foreign companies are planning investment in Chabahar, which is seen a potential transit hub in the Sea of Oman.
Iran has already negotiated US $2-billion worth of deals with European investors, according to Deputy Economic Affairs and Finance Minister Mohammad Khazaei, while the Minister of Industry, Mine and Trade, Mohammad Reza Nematzadeh has said that the country is expecting to finalise US $185-billion worth of deals by the end of the decade.
"We are looking for trade that goes both ways and cooperation in development, design and technique,” said Nematzadeh, during a trade conference in the Austrian capital Vienna in late July. “We are no longer interested in a one-way import of commodities and machinery from Europe."
The UN Security Council has passed a resolution which approves the international accord between Iran and the six powers. But not until The International Atomic Energy Agency (IAEA) has compiled a report for the UN Security Council that Iran has lived up to certain requirements for the accord, will the sanctions actually be lifted.
If Iran breaks the agreement during the next decade, the sanctions against the country can be reinstated. All 15 countries on the Security Council supported the historical accord, which is meant to ensure that Iran does not develop nuclear weapons. The varies sanctions against Iran will be lifted gradually, according to various EU officials, while US sanctions will not begin to be repealed until the US Congress has voted in favour of the nuclear accord.