Italy’s Renzi visits Teheran

Iran's Rouhani and Italy's Renzi during a conference

Iran’s Rouhani and Italy’s Renzi during a conference

MILAN – Italian Prime Minister Matteo Renzi is flying to Iran on Tuesday for a two-day official visit with leaders of the Islamic Republic that is also packed with meetings with Iran’s business and trade representatives.

Renzi’s visit to Iran is the first by a European Union’s government leader since January, when the Obama administration lifted measures focused on the country’s nuclear program. Restrictions designed to punish Iran for its support of Lebanon’s Hezbollah remain in place, including most of a wide-ranging embargo on American business with Tehran that’s been in place since 1995.

At the same time, the European Union that has long viewed Iran as a vital trading partner, lifted most of the economic and financial curbs that it had first imposed on Tehran in 2008, paving the way for European businesses to resume trade with Iran.

Delegations from France, Austria, Poland, Hungary and Spain are also expected also visited Teheran in search for deals during the last year.

Renzi is the first European prime minister to visit Iran and his country is well positioned to restart its business relationship with Iran. Italy was Iran’s largest trading partner in the EU until 2006. Trade was valued above €7 billion before sanctions had been imposed, and by 2013 it dropped to as low as €1 billion.

Rome was the first stop for Iranian President Hassan Rouhani, when had set off on a European tour at the end of January to drum up goodwill and business for his country as it seeks to emerge from years of isolation.

During January’s two-day visit in Rome, the first by an Iranian leader in more than a decade, 17 Memorandums of Understanding, were signed, their estimated value exceeded €17 billion.

During his two-day visit, the Italian prime minister will chair a business forum and meet with President Rouhani. He is expected to sign several memorandums of understanding between state-owned Italian companies and their Iranian counterparts.

Renzi will be accompanied by a delegation of 60 business and trade leaders, including senior managers from Ferrovie dello Stato (FS), the Italian railway company, ENI, the Italian Oil and Gas giant, Telecom, Italy’s largest telecommunications company, Finmeccanica, the Italian aerospace and defence company as well as a plethora of other companies such as Danieli, one of the worlds’ largest suppliers of equipment and plants to the metal industry and Carlo Gavazzi Space, the aerospace company that built the Mesbah 1 and 2 satellites for Iran.

“Renzi’s visit should conclude with the signature of 13 additional MOUs bringing the total number to 30,” a source with knowledge on the trip’s details told POLITICO, estimating their value at around €30 billion.

Renzi’s trip to Iran is the third by an Italian delegation in the last six months.

In November, a group of 378 Italians from 12 banks and 178 companies ­– the biggest European delegation since the thaw in relations ­– flew to Tehran. And in February, a group led by Confindustria, the Italian Confederation of Industries, was in Iran again to finalize some of the MOUs and take steps toward the signing of contracts.

Licia Mattioli, a senior member of Confindustria’s International and Foreign Investments Division and a member of Renzi’s delegation to Iran, told POLITICO that Confindustria requested “to meet the minister of industry, energy, of oil and gas, as well as of transportation, health and agriculture.”

MOUs don’t immediately translate into contracts and one of the pressing points the Italian delegation will try to solve during the two-day meeting are the legal doubts still surrounding a lot of the deals, a source told POLITICO.

So far the known agreements signed by FS, the railway company, include investments for a total €5 billion. Italy’s state railway company is expected to be the key technical partner in the construction of the new 900-kilometer high-speed line that will link the capital Teheran to Qom, a Holy City located about 150 kilometers south of the capital.

The FS also won the bid for the electric work on the Tehran-Mashhad train line and was selected as a “preferred bidder” for the development of the city’s new metro lines. Mashhad is the second largest city in the northeaster part of the country close to the borders with Turkmenistan and Afghanistan.

There’s even more potential for FS as Iran and its representatives will push to be an important part of Iran’s plan to expand its railway network from the current 10,000 kilometers to 25,000 kilometers in the next five years.

“It’s an incredibly attractive market and the moment is perfect,” said Roberto Masarin, a consultant specialized in helping Italian companies penetrate the Iranian market.

“On the one hand you have Iranian companies that need new technology to modernize their businesses, having the capital but not the know-how, on the other there are specialized Italian mechanic companies that own the know-how and are eager to approach new markets,” Masarin said.

COSA FA MASARIN CON IMMERGAS XXXXXX

But it’s not just about the big players.

Per capita purchasing power of Iran’s 80 million inhabitants is poised to increase by 4 percent over the next two years. Also, a population where 50 percent of people are under the age of 35 makes the country an incredibly attractive consumer market.

Aware of the Iranian appetite for high-end and high-quality luxury goods, many Italian brands have been swift to move into the Iranian market once the first sanctions were lifted on January.

Among these Roberto Cavalli. The Florence-based fashion house opened a mono-brand store in Tehran’s posh Zafaraniyeh neighbourhood on February 19. “We believe Iran represent a great market and that’s one of the reasons that pushed us to be the first to open: we wanted to assure Cavalli had a competitive advantage in Iran,” Renato Semerari, Cavalli’s CEO tells POLITICO

With less than a month since the opening its’ still early to make judgements, “but I can say things are going beyond expectations, especially when it comes to the men clothing and shoes and that if things continue as they are now we are planning to expand in the future” Semerari adds.

Versace is also poised to open at the end of April. The company behind the mono-brand shop opening is an Italian-Iranian company called KelldeTalaei, focused on made in Italy luxury and with the ambition to bring Italian food and design after it exports the made in Italy fashion industry.

“We will open a new Versace mono-brand soon,” Elia Saramin, KelideTtalaei’s general manger told POLITICO.

“I can also say that we are talking to a lot of the most important Italian brands to see if we can open shops in Teheran. I can’t say more on who at the moment, but I can assure you that there is a lot and a lot of interest, from Italian companies as well as from Iranian investors.”

It’s still too early to assess the impact of the increased trade relations on the Italian economy, but according to estimates by SACE, the Italian export credit agency, trade should increase by about 3 billion over the next two years, a welcome boost to Italy’s sluggish economy.

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