Iran Investment Risk-Reward AnalysisIt has been more than a year that Iran and P5+1 agreed on the Join Comprehensive Plan of Action (JCPOA),and Iran has fully complied with the JCPOA.

Many nuclear related sanctions have been removed yet substantial international investment has not followed.

We spent extensive hours of detailed discussionswith our international clients, international investment banks and various international companies over the past 10-12 months.

To study Iran Investment Risk-Reward we categorizedthe investors based on the “location of the operation” and “Type of Activity”.

> Background > Categories

Asian Investors

Us Investors

European Investors

Russian Investors

International and multi-national investors

Location of Operation

Investment Banks (Financial sector)

Energy and Non-Energy companies

National/Government-Owned vs. International/Private Investors

Type of Activity

> Opportunities> RisksExisting and potential US Sanctions

US Policy toward Iran

Future of JCPOAand Nuclear Deal

Reputation Risk and Risk of Loosing Access to theUS market and Financial System

Corruption and Lack of Transparency

Complex Due-diligence Process

Huge Oil & Gas Resources

Low Production Cost

Huge Untapped Natural Gas Resources

Location; Land &Water Access to Major Markets

Educated Labor & Infrastructure

Investment IntegrationOpportunities

Oil, Gas, Condensate for Services

Relatively Higher Political Stabilityin the Region

Flexibility in Negotiations & Open to Investors Terms

UnfinalizedInvestmentRegulations

High demand for the ServiceCompanies

Dominance of the Sanctioned Entities Over the Economy

Lack of Management/ Complex Bureaucracy

DomesticPolitics

Uncertainties Toward Future DomesticPolitics in Iran

Iran's MissileProgram

Security of Assets & Personnel

Relation with Saudi Arabia and GCC

Source of Arbitration (Negotiable)Risks Tolerance

Based on the Location of the Investor

RisksToleranceBased on

the Locationand Type

of Investor

Russia& China

India

Europe

Japan

Us

AmericanCompanies

JapaneseEnergy

Companies

EuropeanInvestment

Banks European& JapaneseNon-EnergyCompanies

Asian/Middle EasternInvestment Banks &Companies

National/GovernmentOwned Investors in Russia,China, India

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> Asian Investors > Russian Investors > EU Investors > US Investors Asian companies perceive lower investment risks compared to European & American companies because:

Governments support for doing business in Iran

Historical political & business ties with Iran

Access to Iran’s energy resources Iran’s geopolitical & geographical location

Political & business opportunities

Japanese Investors are Particularly worried of:

“Reputation Risk” and Risk of loosing access to US markets

Tensions between Iran and Saudi Arabia (US Ally)

Lack of transparency in Iran’s financial system

Money Laundry Corruption

Iran’s relation with Saudi Arabia and fear of endangering the prospects of their business with the Kingdom

U.S. remaining sanctions, and potential future sanctions.

Risk of loosing access to the U.S. financial system

Risk of violating the complex web of U.S. regula-tions

Future of JCPOA and Iran’s commitment to the Nuclear Deal

Indian, Chinese, Korean and some of the Middle Eastern investment banks see higher benefits and reward in investing in Iran

EU banks are very enthusiastic to invest in Iran but they are still cautious and are waiting to have a clear view of US approach toward Iran

> Energy Investors> Investment BanksEnergy companies moved much slower with regard to their investment decisions in Iran.

Major contributing factors for hesitation of Energy Investors to Invest in Iran

- low oil prices and market oversupply - Iran’s inability to finalize its energy investment regulations (IPC)

- US new administration & uncertainties over future of nuclear deal and possibility of future sanctions

- Uncertainties over waiver of US secondary Sanctions

> National/Government-Owned vs. International/Private Investors

We generally observed that government owned companies, or private companies that either had government support or have government encouragement to invest in Iran, showed higher tolerance for the vagaries of investment risks in Iran For instance, French investors (including Total) were all encouraged to do business with Iran under the vast support umbrella of their government.

On the other side of the spectrum, U.S. investors have been hampered by their government’s fairly hostile relationship with Iran.

Have an influence on Iran’s energy industry and its global energy trade flow (particular-ly on the gas exports to EU)

Russia’s historical political & economic ties with Iran increased specifically after the implementation of international sanctions on Russia since the Crimea crisis.

Since the nuclear deal, IRGC owned companies have increased their business activities and relation with Russian and Chinese companies.

Access to Iran’s energy resources (natural gas) is important for EU’s energy security & supply diversification

Iran’s close relations with Russia is perceived a risk for EU energy investors and those that are looking into long-term energy relations and energy imports from Iran.

High risks with regard to Security of personnel, investment & assets

Legal limitations and barriers due to historical US sanctions on Iran since 1979 revolution

Political and trade disconnect with Iran

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