Oil, banking and automotive could be biggest winners from Iran deal

28 June 2015

Turquoise Partners predicts $100bn in frozen funds will be used to finance oil, gas and other infrastructure

  • Windfall could be used to update oil assets
  • Banks would be able to resume international activities
  • Limited impact forecast for non-oil exporters

The oil and gas, banking and automotive sectors will benefit the most if Iran is freed from sanctions after a successful nuclear deal on 30 June, according to Tehran-based investment firm Turquoise Partners.

Iran is expected to receive $100bn of funds that have been stuck in overseas banks since the introduction of sanctions against the Iranian banking system. These will be released to the government if the barriers are lifted.

“The Iranian government is planning to use these funds in order to finance the infrastructure projects inside the country, especially in oil and gas,” Shervin Shahriari, fund manager at Turquoise Partners, told MEED.

“The oil minister seems to be the most enthusiastic member of the cabinet and has an extensive plan for post sanctions, claiming that Iran will raise $100bn in oil and gas projects once sanctions are lifted,” he added.

Iran is expected to increase oil production and exports if sanctions are lifted against its oil and banking sectors, but the Petroleum Ministry and analysts are divided over how quickly exports will rise.

Iran will require significant investment and expertise from international oil companies (IOCs) to sustainably raise oil and gas production in the longer term.

“On the non-governmental area, I think the banking sector will definitely benefit from the possible easing in sanctions,” said Shahriari. “Banks have been unable to carry out their regular international activities, such as opening letters of credit, money transfers and trade finance. Once the sanctions are lifted, they can go back to normal and resume their activities.”

Shahriari added that the automotive sector could see a possible rebound, having been through difficulties acquiring manufacturing parts that has caused production to half.  

“The fast-moving consumer goods (FMCG) sector will also attract lots of interest and we expect multinationals to expand their current businesses in Iran,” he added.

Turquoise Partners does not believe that the easing of sanctions against the banking sector will help increase volumes of non-oil exports, as exporters have used unofficial exchange houses.

“Exporters haven’t had any serious issues exporting, mainly to Asia. [However] relief of sanctions will reduce their cost of money transfer,” said Shahriari.

At the same time, the lifting of sanctions would help non-oil industries and manufacturers increase production capacity – especially in petrochemicals – which will help boost exports over the long run.

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