Back in business on the silk route

A nuclear deal with Iran has paved the way for Maersk Line to re-start its business in a country viewed by many as the world’s biggest potential market. However, doing business in one of the world’s most highly sanctioned countries comes with many challenges, not least compliance with foreign trade controls. 

Silk_Route
Photo: Jesper Schwartz

“Back then, we all suffered from the sanctions,” says Shamim Rahami, managing director of Iranian Silk Road, a logistics company dealing mainly with the import of building materials and auto parts to Iran, and export of bitumen worldwide.

“Many industries were forced to shut down because nobody would sell commodities and materials to them, and companies could not work with the international banking system. But today, the economic situation is improving and I am sure things will continue to get better.”

Poster image
Maersk Line has returned to business in Iran – and both customers and employees are returning. 00:46

Iran: Facts & Stats

Capital: Tehran (picture)

Population: 80 million

Main exports: Oil and natural gas - Iran has the third largest proven gas reserves and oil reserves in the world. Other exports include chemicals, plastics and fruits. Iran mainly exports to Taiwan, China, Turkey, South Korea and India.

Main imports: Machinery, cereals, iron and steel, chemicals. Main import partners are the UAE, China, South Korea, Turkey and Germany.

Iranian Silk Roads was one of the first companies to resume business with Maersk Line when it re-entered the Iranian market last year, having been forced to pull out in 2012 due to global sanctions on Iran.

Opening up to the world

The comprehensive sanctions programme placed on Iran by the US and the EU hit the country hard, crippling its economy and leading to shortages and high prices for commodities such as food, fuel, and medicines.

Yet now, with the announcement of a finalised nuclear deal, which has lifted sanctions in exchange for Tehran curtailing its nuclear program, Iran is once again opening up to the world.

Maersk Line is well-known for its consistent compliance program, but we apply extra caution to the Iranian project. At every step we are leaving no stone unturned to validate any piece of information related to Iran transactions.

Alexandra Belmonte, Group Rule Owner of Foreign Trade Controls

With a population of 80 million, and known oil reserves among the top-five globally, there is great optimism in terms of what the deal means for the economy in the long-term. The market is viewed by many analysts as being today’s ‘single largest investment opportunity’.

For Maersk Line, it was an opportunity to re-establish the business it had been forced to exit when the US blacklisted the Iranian operator of several ports, including Iran’s biggest container terminal Bandar Abbas – making shipping to Iran impossible.

“Today, Iran is still one of the most highly sanctioned countries in the world,” says Alasdair Adam, Customer Service Manager at Maersk Line Iran.

Teheran
“We all suffered from the sanctions. But today, the economic situation is improving and I am sure things will continue to get better” Shamim Rahami, Managing Director at Iranian Silk Road.

 We all suffered from the sanctions. But today the economic situation is improving and I am sure things will continue to get better.

Shamim Rahami, managing director of Iranian Silk Road

“However, with the internationally supported Joint Comprehensive Plan coming into effect from January 2016, and several trading restrictions being lifted, Iran is increasingly open to international commerce and trade. Whilst there are challenges, it is an economy with enormous potential, and a growth story we want to facilitate and be a part of.”

A huge compliance task

Restarting export and import services to Iran has been far from easy, as many sanctions continue to be in force. Most trade between the US and Iran, as well as commercial involvement by US persons in Iranian trade is still prohibited.

A mammoth compliancy task had to be completed before the business was ready.

“Re-entry to Iran took around six months to a year of pre-work and setting up,” explains Christian Juul-Nyholm, Managing Director of the United Arab Emirates cluster.

“We already had a license, but setting up the organisation, staffing the office and ensuring we are fully compliant with all international regulations and foreign trade controls was a major task.

“Sanctions target people, entities and even commodities. There’s a 76-page list of parties you cannot deal with. It’s also easy to forget that many countries aside from the US have sanctions on Iran. We discovered that Malaysia does for example, so transshipment through Malaysia posed an issue.”

Another challenge was the Iranian banking system. “Iranian banks have yet to catch up with international banking systems and most international banks are still extremely cautious in dealing with Iranian businesses in light of potential penalties,” says Mozhgan Tafreshi, Sales Manager at Maersk Line, Iran.

Technology issues

One of the most significant barriers was the restricted use of Maersk Line global systems. Any IT or software that contains more than 10% US components is blacklisted in Iran, which means that most of the standard systems cannot be used.

“The team does not have access to the same systems as our colleagues in the rest of the world,” says Adam. “We cannot use any Windows applications or the internal instant messenger for example. At times it can be a challenge to connect with internal stakeholders – something which is often taken for granted – as our communication channels within the organisation are limited.”

Colleagues travelling to Iran must always be careful to leave their iPhones at home. “If we were to use an Apple system, being a US product, we would be liable to penalties – and fines could start at USD 250,000 per violation. That’s a lot of money just to bring a phone into the country.”

If we spot a risk, we say no

Manish Mehta, Maersk Line UAE, who managed the Iran re-entry project says:

“The Iran re-entry is a result of an intensive collaboration among all teams – commercial, finance, operations, legal, HR and IT, despite being in distant locations. We derive great comfort from the automation of compliance checks in our internal systems as it allows the conduct of business in a controlled environment, leaving no room for mistakes and eventual penalties." 

Besides proactive checks by a specialised team in the Global Service Center (GSC) in India, supported by the legal compliance team in Dubai and Copenhagen – additional due diligence measures have been introduced that screen every customer and commodity and their acceptability as per international sanctions regulations.

‘We worked closely with teams in the GSC including the compliance, quoting and booking teams to set up strong compliance checks. For example, we included customer checks at the booking stage as standard,” explains Manoj Menezes, Business Process Manager, Maersk Line UAE.

“Maersk Line is well-known for its consistent compliance program and adherence to the international regulatory framework,” says Alexandra Belmonte, Group Rule Owner of Foreign Trade Controls.

“But we apply extra caution to the Iranian project, through the deployment of a thorough due diligence review prior to commencing any type of business relationships with vendors of any Iranian background. At every step, we leave no stone unturned to validate any piece of information related to Iran transactions.”

“If we spot a risk we just say no to the request,” adds Georgios Vamvourellis, Regional Head of Legal & Compliance, West Central Asia. “It’s a constant process, it happens throughout the day. Training is so important and we try to keep a small team – it’s about constantly monitoring the changes and ensuring we keep up. It’s not an easy process but we are now in a position where we understand what needs to be done. But it’s been a learning curve.”

The teams ensure that there is no US link to transactions with Iran and has a separate invoicing and collection system for its business to Iran.

A huge potential market

Despite the challenges, there is huge optimism for the future of the business in Iran. The current market size is estimated to be 700,000 FFE and Maersk Line is running four weekly foreign feeder vessels into Bandar Abbas and Bushehr. While reinstating a direct call to Iran is in the pipeline, it is at least a year away.

Maersk Line’s strong reputation for compliance has proved to be a valuable selling point with potential customers in Iran.

“100% compliance is non-negotiable for us,” says Christian Juul-Nyholm. “It enables us to offer a competitive advantage to our customers. Maersk is the name you choose to show you are doing things ‘by the book’ – that’s the reputation we want. It’s part of our brand – reliable, trustworthy, and being a responsible corporate citizen.”

Iranian Silk Roads agrees this has proved crucial in the business relationship.

“We cannot put our company in a dangerous place,” sums up Shamim Rahami. “We appreciate the work Maersk Line does to check all consignments and the many policies and regulations it has for accepting shipments.”

Iran is still one of the most highly sanctioned countries in the world. But whilst there are challenges, it is an economy with enormous potential, and a growth story we want to facilitate and be a part of.

Alasdair Adam,

Alasdair Adam, customer service manager, Maersk Line Iran