Iran boosts oil output, foreign firms keen to seal deals

Others were more wary, mindful of the risk of falling foul of an array of U.S. penalties that remain in place despite the lifting of nuclear-related sanctions on Saturday by the United States, European Union and United Nations.

Those measures were scrapped as part of a landmark deal between Iran and world powers, rewarding the Islamic Republic for scaling back its atomic energy programme in ways that U.S. President Barack Obama said would prevent it from getting its hands on a nuclear bomb.

“We will be committed to the nuclear deal as far as the other side is,” Iranian President Hassan Rouhani said on Monday, adding that his country was “morally and religiously committed not to seek weapons of mass destruction”.

The agreement restores Iran’s access to tens of billions of dollars in frozen assets, reopens the country to foreign investment and allows it to resume selling oil on world markets, albeit at a time when they are drowning in excess supply.

Deputy Oil Minister Rokneddin Javadi said Iran could increase output by 500,000 barrels per day (bpd) “and the order to increase production was issued today.”

The sanctions revoked at the weekend had cut Iran’s oil exports by about 2 million bpd since their pre-sanctions 2011 peak, to little more than 1 million bpd.

Oil prices touched their lowest since 2003 on Monday as an already oversupplied market braced for additional Iranian exports.

The lifting of sanctions opens up business opportunities across a host of sectors, from planes to telecoms.

“Iran is a huge market and in our focus,” Kaan Terzioglu, head of Turkey’s biggest mobile operator, Turkcell, said in an interview with Reuters.

He said Iran could be a target market as the company looks for regional acquisitions: “We are closely watching the Iranian market and in touch with all of its fixed line and mobile operators.”

NEW MIDDLE CLASS

Dennis Nally, global chairman of PricewaterhouseCoopers, told Reuters before the start of this week’s World Economic Forum in Davos that the audit and consultancy firm was seeing strong client interest in opportunities in Iran.

“Without question the energy, energy-related and infrastructure industries stand to benefit, but also sectors like retail, with the potential creation of a new middle class,” he told Reuters.

A clutch of German firms were among those to signal their appetite to ramp up business ties with Tehran, and the Berlin government said it planned to revive state export guarantees for companies that wanted to do so.

Daimler said its trucks division had signed letters of intent with joint venture partners in Iran in order to re-enter the market, where it was selling up to 10,000 vehicles a year until 2010. Its rival Audi said it had representatives in Iran right now to discuss the “growing potential for luxury cars.”

Herrenknecht, a family-run German tunnelling company that helped to build the Tehran metro in the 1990s, said it expected Iran to put up new projects for tender, and it was ready to pounce on the opportunity.

Commerzbank, Germany’s number two lender, also said it was considering the possibility of returning to Iran.

That announcement was especially striking, less than a year after Commerzbank agreed to pay $1.45 billion to U.S. authorities for sanctions violations partly linked to Iran. At the time, it joined a long line of foreign banks similarly penalised – France’s BNP Paribas alone paid $8.9 billion.

For that reason, most international banks are expected to tread very carefully to avoid violating U.S. trade sanctions that remain in place.