Doing Business in Iran: Donald J. Trump; Mining Investment Opportunities
  • By Shahram Safai, January 2017

     
    Iran

     

    The election of Mr. Donald J. Trump as President of the United States has resulted in much consideration by corporates of existing strategies with respect to Iran. Mr. Trump’s lack of experience in public office and some of his election campaign statements continue to cause anxiety. Will Mr. Trump tear up the Iran nuclear agreement and re-negotiate? Will he impose further sanctions on Iran? However, despite his election campaign rhetoric, his 100 day plan which appeared on YouTube on November 21, 2016 and his press conference of January 11, 2017 focused almost solely on domestic issues to the exclusion of foreign policy. Mr. Trump has also amassed more billionaires in his cabinet than ever before in US history. Hence, Mr. Trump’s approach to foreign policy may shape up to be more business driven and “transactional in nature” rather than Pax Americana driven (for example, no longer anti-Russian). He has reinforced this message by appointing a Secretary of State, Rex Tillerson, who is the CEO of Exxon Mobil which is one of the original ‘Seven Sisters’ oil companies with a deep history in Iran. At the end of the day, it’s always difficult to predict such matters. However, with respect to Mr. Trump’s foreign policy intentions, the fog does appear to be lifting somewhat.
    Mining Investment Opportunities
    Although foreign investment in Iran has slowed since September of 2016 due to the US elections, a resurgence is expected after Mr. Trump takes office given that there will be more clarity. One industry which offers much promise in Iran is the mining industry. Iran has the world’s largest zinc reserves and the second largest copper reserves. It also has significant coal, gold, manganese, chromate, lead, uranium and iron reserves. The government of Iran owns 90% of all mines and related industries (under state-owned company Iranian Mines and Mining Industries Development and Renovation Organization). However, there has been a concerted effort to attract foreign investment by promotion of the privatization of all mines under Article 44 of the Constitution of Iran. 
    Foreign Investment in Mining
    As a result, Iran is actively searching for foreign investment in the mining industry. A foreign investor can invest in the Iranian mining industry through a local company in Iran. Unlike many other countries in the region, there is no obligation to enlist a local partner and a foreigner can be the 100% owner of such Iranian company. 
    Also, under the Foreign Investment Promotion and Protection Act, 2002 (“FIPPA”) a foreign investor has multiple legal protections. For example, by sovereign guarantee from the Iranian government, if a foreign investment is affected by expropriation or nationalization, compensation will be paid; all invested capital and resulting profit of a foreign investor in Iran can be repatriated; and the foreign investor will receive the same treatment afforded to domestic investors. 
    With respect to governmental permissions for foreign investment in the mining industry, the foreign investor needs to obtain an investment licence from the Organization for Investment Economic and Technical Assistance of Iran, and an activity licence from the Ministry of Industry, Mine & Trade (“MIMT”). In this regard, the foreign investor will be required to prepare an exploration operations report for submission to the MIMT. If approved, the foreign investor can apply for an exploration certificate (by submitting a production plan). Subject to approval, the company will then be issued an exploitation licence (which is subject to certain tax exemption periods).
    Given the Trump administration’s “transactional” approach to foreign policy, the Iranian government’s willingness to facilitate mining investment in Iran, and the protections afforded to foreign investors in Iran, the time may be ripe for considering mining investment opportunities in Iran. ■

    The election of Mr. Donald J. Trump as President of the United States has resulted in much consideration by corporates of existing strategies with respect to Iran. Mr. Trump’s lack of experience in public office and some of his election campaign statements continue to cause anxiety. Will Mr. Trump tear up the Iran nuclear agreement and re-negotiate? Will he impose further sanctions on Iran? However, despite his election campaign rhetoric, his 100 day plan which appeared on YouTube on November 21, 2016 and his press conference of January 11, 2017 focused almost solely on domestic issues to the exclusion of foreign policy. Mr. Trump has also amassed more billionaires in his cabinet than ever before in US history. Hence, Mr. Trump’s approach to foreign policy may shape up to be more business driven and “transactional in nature” rather than Pax Americana driven (for example, no longer anti-Russian). He has reinforced this message by appointing a Secretary of State, Rex Tillerson, who is the CEO of Exxon Mobil which is one of the original ‘Seven Sisters’ oil companies with a deep history in Iran. At the end of the day, it’s always difficult to predict such matters. However, with respect to Mr. Trump’s foreign policy intentions, the fog does appear to be lifting somewhat.

    Mining Investment Opportunities

    Although foreign investment in Iran has slowed since September of 2016 due to the US elections, a resurgence is expected after Mr. Trump takes office given that there will be more clarity. One industry which offers much promise in Iran is the mining industry. Iran has the world’s largest zinc reserves and the second largest copper reserves. It also has significant coal, gold, manganese, chromate, lead, uranium and iron reserves. The government of Iran owns 90% of all mines and related industries (under state-owned company Iranian Mines and Mining Industries Development and Renovation Organization). However, there has been a concerted effort to attract foreign investment by promotion of the privatization of all mines under Article 44 of the Constitution of Iran. 

    Foreign Investment in Mining

    As a result, Iran is actively searching for foreign investment in the mining industry. A foreign investor can invest in the Iranian mining industry through a local company in Iran. Unlike many other countries in the region, there is no obligation to enlist a local partner and a foreigner can be the 100% owner of such Iranian company. 

    Also, under the Foreign Investment Promotion and Protection Act, 2002 (“FIPPA”) a foreign investor has multiple legal protections. For example, by sovereign guarantee from the Iranian government, if a foreign investment is affected by expropriation or nationalization, compensation will be paid; all invested capital and resulting profit of a foreign investor in Iran can be repatriated; and the foreign investor will receive the same treatment afforded to domestic investors. 

    With respect to governmental permissions for foreign investment in the mining industry, the foreign investor needs to obtain an investment licence from the Organization for Investment Economic and Technical Assistance of Iran, and an activity licence from the Ministry of Industry, Mine & Trade (“MIMT”). In this regard, the foreign investor will be required to prepare an exploration operations report for submission to the MIMT. If approved, the foreign investor can apply for an exploration certificate (by submitting a production plan). Subject to approval, the company will then be issued an exploitation licence (which is subject to certain tax exemption periods).

    Given the Trump administration’s “transactional” approach to foreign policy, the Iranian government’s willingness to facilitate mining investment in Iran, and the protections afforded to foreign investors in Iran, the time may be ripe for considering mining investment opportunities in Iran. ■

     

     
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