With Iran rejoining the global economy, Japanese companies are lining up to resume business ties with the oil-rich Middle Eastern market.
Tokyo on Friday lifted sanctions on Iran, falling in line with major world powers after the International Atomic Energy Agency confirmed last weekend that Tehran had fully taken steps to place temporary curbs on its nuclear program. As such, January 16 marks the official end of western sanctions against the Islamic Republic.
With the lifting of sanctions, Japanese insurance companies will be able to issue policies covering trade deals involving Iran. Japanese business will also be able to make new investments in Iran’s oil and gas sector.
Japan’s Foreign Minister Fumio Kishida visited Iran in October and struck an investment deal stipulating protection of assets of Japanese firms investing in the country, Japanese business journal Nikkei Asia Review wrote on its website.
Now that the anti-Iran sanctions are a thing of the past, Tokyo is soon expected to conclude the investment pact to help Japanese firms expand into the Iranian market.
Japanese automakers, including Toyota Motor, Nissan Motor and Mazda Motor, which had long anticipated this moment, aim to quickly restart exports.
Some Japanese car companies have begun procuring parts and planning deliveries since last fall in hopes of jumping back into the market, which sees over one million new vehicle sales annually.
Isuzu Motors, Mitsubishi Motors Corp. and Suzuki Motor Corp. are considering returning to the Iranian market.
Infrastructure-related demand is also expected to grow in Iran. With Iran planning nearly 30 high-speed railroad projects, Japan hopes to export its Shinkansen bullet train systems, according to Japanese newspaper The Japan News.
Iran also plans to buy hundreds of passenger aircraft over the coming years to replenish its aging fleet.
“Iran is said to be interested in Mitsubishi Aircraft Corp.’s Mitsubishi Regional Jet, the first Japanese-made passenger jet,” the newspaper wrote.
In the financial sector, Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp. and Mizuho Bank are mulling restarting some money-wiring service to Iran now that the ban on currency exchange contracts and other transactions will be lifted. The service will cover non-dollar currencies such as the yen and euro.
Insurance companies can also issue trade policies lasting longer than two years.
Iran, with a population of about 80 million, has the world’s largest natural gas reserves and fourth-largest oil reserves. Some say when the country starts pumping out more crude, it may spark a further drop in oil prices.
But Yasushi Kimura, chairman of oil wholesaler JX Holdings, is unfazed. “An additional source of crude oil will also lead to steady supplies,” he said.
According to Financial Tribune, Japanese companies can now make new gas and oil-related investments or acquire stakes in crude and natural gas development projects undertaken by Iran.
At Iranian oil plants and other installations, refurbishing work on aging facilities has stalled due to restricted exports of components from Japan, the US and Europe.
Trading house Itochu as well as major plant builders such as JGC, Chiyoda and Toyo Engineering are on the hunt for repair orders. Itochu may increase personnel at its Tehran office. Chiyoda plans to send permanent staff to the Iranian capital as soon as fiscal 2016.