When Iranians re-elected Hassan Rouhani for president on Friday, the news was well-received among foreign companies looking to tap into the huge post-sanctions economy. But experts say the election of a moderate president will unlikely be a quick solution to the many hurdles of doing business in Iran.

Receiving 57% of the presidential votes last week, Rouhani secured a comfortable defeat over the hardline opponent Ebrahim Raisi, in what is seen as an endorsement for his efforts to seek better relations with the west and open Iran to the global economy.

The election outcome is good news for foreign companies operating in the Iranian market, says Chris Parker, CEO of Iran Business Hub, a UK-based consultancy advising companies on export to Iran. “It’s moderation rather than towards some of the high-risk candidates. As long as things keep progressing, that’s very good for business,” he tells GTR.

Rouhani was the man who in 2015 lead Iran into a new era when he signed the landmark nuclear deal – the Joint Comprehensive Plan of Action (JCPOA) – with six world powers, which saw international sanctions lifted on Iran in return for curbs on its nuclear programme.

The Iranian president has pledged to reform and revive the country’s ailing economy, and do so by continuing his efforts to attract foreign investment and boosts international trade – a direction that has now been widely approved by the Iranian people.

“The risk profile has gone down, because this was a re-election, a confirmation of what is going on has been approved by the people, and therefore a high stability indicator in a developing post-sanctions regime,” Parker says.

The new business optimism has, just a few days after the election, already started to show. In fact, Parker says Iran Business Hub has received remarkably more interest from UK businesses in the first days since Rouhani’s win.

“Based on last year, we normally had three or four inquiries a week. We’ve had 10-12 inquiries in the last 24 hours – people who have booked calls and meetings. A lot of them have been waiting for signals that things are not going the wrong way,” he says.


Challenges remain

Despite renewed interest, many businesses will stay cautious when it comes to Iran, says Parham Gohari, co-founder and head of consulting at Frontier Partners, which advises corporations on investments in the Iranian market.

Like Parker, he says many of his clients had been holding back on important decisions until the Iranian presidential election was over. “You had the Trump effect and the Iranian election, which created a lot of uncertainty for foreign investors. A lot of our clients put things on hold, waiting to see the result of the elections and if there is further retaliation from the US government,” he tells GTR.

But, he says, he is “cautiously optimistic” about the changes that the re-election of Rouhani will foster. “It creates a bit of ease and peace of mind of the investors. But it’s not to say now the window is open and everyone is going to be jumping in. They will slowly reassess the situation, do their investigations, etc. So it’s going to be slow process.”

He continues: “There are still a lot of issues and challenges surrounding Iran: the geopolitical situation, the internal issues, operational issues around financial transparency, corruption, international transfer of funds. It’s getting better day by day, but just because Rouhani has been re-elected doesn’t mean that all these other issues are completely gone.”

Parker also admits that while the market has started to react to Friday’s event, it won’t be the end to one of the most pressing issues that businesses face when trading or operating in Iran. “The big obstacles remain, which is financing and the movement of money, and that’s the next big challenge,” he says, referring to the fact that, despite the easing of sanctions, international banks have refrained from dealing with Iran business at all, worried of falling foul of US sanctions that are still in force.

Consequently, the future of the Iranian economy will to a large extend depend on how relations with Trump’s administration in the US develops – something that remains a bit of a question mark.

On the campaign trail, Trump repeatedly vowed to scrap the JCPOA agreement, and in early February, his administration imposed new sanctions against the country in response to Tehran’s latest ballistic missile test. Michael Flynn, Trump’s national security advisor at the time, said the US was “officially putting Iran on notice”.

Yet, the White House renewed sanctions relief for Iran last week.

Gohari expects that the US’ harsh approach to Iran to continue. “The fact that Trump was visiting Saudi and Israel right at the same time as the election, that’s sending a pretty clear message. The US stance on Iran will be tough,” he says, and concludes: “The risk [of doing business in Iran] is significantly lower. But there are still other types of risks on the table, which one should take into account.”