UK-based Westminster Group has said it has put its Iranian projects “on hold whilst it seeks clarification on the impact of the US withdrawal from the JCPOA.”
The company said in its AGM statement:
“A defining achievement for the Company so far in 2018 was the formal signing on 7 May of a long term (15 year) contract for equipment and services at one of the 60+ airports in Iran. The contract, with initial annual revenues in excess of €24 million Euros, was the culmination of over two years complex and intensive negotiations and planning.
“During the latter part of 2015, with the Joint Comprehensive Plan of Action (JCPOA) implementation date of 16 January 2016 approaching, we identified Iran as potentially one of the world’s most exciting emerging markets, a view shared by leading analysists. Iran’s economy is the second-largest in the Middle East and North Africa region after Saudi Arabia. It is larger than Australia’s and approaching those of Turkey and Spain. It has a population of close to 80 million people, with a median age of 28, with strong aspirations to travel and engage with the rest of the world. Iran has a strong economy, an educated populace and a diaspora of over 4 million.
“The country is recognised as a significant potential global aviation market after almost four decades of isolation and with over 60 airports in need of expansion and upgrading is potentially one of the world’s fastest growing aviation opportunities. It is also strategically and geographically positioned to potentially be a major cargo and passenger transport hub between East and West.
“We signed a Memorandum of Understanding with the airport authorities in March 2016 and received a formal Letter of Intent in May 2016. Over the past two years we have been involved in wide ranging and complex negotiations with commercial and political bodies with meetings in various jurisdictions. To be in a position to undertake this transformational project we have had to put in place a complex supply chain and invest in our corporate infrastructure, including the establishment of operations in Germany. We also dealt with a constantly changing scope of works as the client prioritised its requirements. In addition, given the sensitivities around operating in Iran, we had to overcome numerous challenges including banking, financing and strict compliance with international sanctions involving detailed due diligence and considerable professional advice from across Europe and the United States (US). Throughout the process we have received and continue to receive, valuable support from the UK government at the highest levels.
“On 22 December 2017 we announced we had finalised legal and commercial negotiations apart from a few minor commercial and contractual issues. On 28 March 2018 we announced that the outstanding commercial and contractual issues has been agreed and that we were awaiting the client’s internal approval process to complete. On 7 May 2018 the client finalised its approval process and the contract was signed. The contract is structured so that the effective date commences on the exchange of formal board letters between us and the client, which was expected to take place within 8 weeks of contract signing. The purpose of the exchange of letters is to allow both parties time to ensure everything is in place before commencing operations whilst giving both parties comfort that the contract was finalised, and terms could not be changed.
“Unfortunately, on 8 May 2018 President Trump made an announcement that the US was unilaterally withdrawing from the JCPOA agreement and re-imposing sanctions. Whilst none of Westminster’s proposed equipment or services is subject to any existing or proposed sanctions, the US action has implications for finance and banking and has created uncertainty in the international business community.
“The other signatories to the JCPOA agreement, being China, Russia, Germany, France and the UK, have all stated their continued support for the agreement, as have the European Union (EU), the United Nations, the International Atomic Energy Agency and most other leading countries around the world. Germany, France and the United Kingdom have jointly vowed to uphold the JCPOA agreement and on 4 June 2018 wrote to the US Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, regarding exemptions for EU businesses and certain banking issues. Also, as widely reported, the EU is considering putting measures in place to protect and support European companies against US extraterritorial actions, which is expected to be in place before 6 August 2018.
“Given the initial uncertainty, and following discussions with our customer and commercial partners, the Board made the decision to place the project on hold whilst it seeks clarification on the impact of the US withdrawal from the JCPOA and the implications for the Company’s banking, finance, insurance, its supply chain and the possible impact on the Company’s other business and therefore to date there has been no formal exchange of board letters to make the contract effective. We have also placed on hold a second smaller contract in Iran for €2.65 million Euros signed at the same time for the same reasons. This decision, which we hope will be temporary, was prudent and sensible as it would have been irresponsible for the Company to commence these projects until such time as we are certain that issues emanating from the US withdrawal would not prevent a successful implementation.
“Whilst some multi-national corporations with large exposure to and trade links with the US have announced a withdrawal from Iranian activities we are encouraged that others such as Renault have publicly stated they are committed to continuing business with Iran. Whilst our client is keen to commence the project as soon as practically possible they are cognisant of and understand our position and are actively working with us to explore various solutions to the challenges posed by the US action. We have engaged with our US lawyers based in Washington who have confirmed that our activities are not covered by direct or indirect sanctions provided that our equipment and services have less than 10% US content. For additional comfort we are exploring the possibility of getting a letter of assurance from the US Treasury which would be helpful. We are in discussions with all relevant parties including our bankers, financial bodies, advisors and supply chain to find a way forward. Our German subsidiary has been critical in this respect and we are making progress, although not all issues have yet been resolved and we believe it is likely we will have to make changes to our banking and some equipment suppliers. Securing this major contract was a momentous achievement and we remain hopeful that the solutions we are seeking, together with the measures being put in place by the EU, will enable this and other potential projects in Iran to proceed in due course.”
(Source: Westminster Group)