Iran’s mining sector is potentially incredibly lucrative for international businesses. Yet, severe challenges remain. Below, A2 assesses the risks.
With around 37 billion tons of proven reserves, and 57 billion tons of probable reserves, Iran has the potential to be one of the world’s premier extractives production countries. Foreign investment has previously been constrained due to the raft of nuclear-related sanctions implemented by the United Nations and the United States. However, Iran’s gradual re-integration into global markets following the Joint Comprehensive Plan of Action (JCPOA) has opened the door for international investment in this potentially lucrative industry.
Iran’s reserves are not only substantial, they are diverse: minerals and metals found in substantial quantities within Iran range from copper to industrial ore to diamonds. Furthermore, Iran is strategically placed in the centre of Asia, and has large deep-water ports situated on the northern shores of the Gulf. It is, therefore, perfectly placed to export minerals and metals both east and west.
Following the relaxation of nuclear-related sanctions, Iranian officials have aggressively pushed for foreign investment. Over the past month, senior Iranian politicians have said that the government is taking steps to encourage international businesses to invest in Iran, such as by the creation of a standard contract template based on the newly implemented Iran Petroleum Contract (IPC), which was created by the oil ministry to encourage investment in the energy sector. Although little concrete information has emerged, such positive signals from Tehran indicate that foreign companies will find a willing partner in the Iranian state when it comes to developing mining infrastructure.
However, companies seeking to develop commercial mining operations in Iran will face a variety of challenges related to political risk, security risk and a poorly developed health-and-safety (HSE) culture. Businesses will have to negotiate the risk of the U.S. administration under President Donald J. Trump reneging on its treaty commitments under JCPOA, and avoid provoking the economically powerful parallel military force, the Islamic Revolutionary Guard Corps (IRGC). Robust risk-management procedures should be in place to mitigate these threats to within acceptable parameters.
Mining disasters are common in Iran, and HSE standards are far below Western norms. For example, on 3 May 2017 a methane gas explosion occurred at the Zemestan-Yurt mine, located in the north-eastern Golestan province. At least 43 people died in the blast, and workers explicitly blamed poor safety standards and a lack of advanced mechanisation systems for the disaster.
“Companies seeking to develop commercial mining operations in Iran will face a variety of challenges”
Given that mining is an intrinsically hazardous business, deficiencies in the bureaucratic, cultural and practical implementation of HSE policies should concern managers considering developing mining operations within Iran. Iran-based workers, particularly those drawn from its large Afghan migrant population, tend not to be insured.
The risk HSE represents to business is particularly severe because Iranian regulatory frameworks surrounding occupational health are reasonably advanced, albeit poorly enforced. This means companies could find themselves liable for HSE breaches under Iranian law, and in the event of an incident, Iranian authorities will likely seek to deflect domestic political pressure by scapegoating foreign commercial entities.
Companies can mitigate this risk by placing HSE policy at the heart of their commercial planning and operations. Robust HSE policies should be in place, focusing both on physical safety standards, working hours and general conditions, and proper monitoring and control mechanisms so incidents or near-incidents can be rapidly flagged to the relevant managerial authority.
Secondly, managers should also prioritise briefing and training local personnel on the importance of best-practices with respect to HSE. Procedures and policy are only robust if they are followed and enforced, and a lack of cultural awareness in Iran over the importance of HSE means that managers must consider how to effectively communicate HSE requirements and obligations to local staff.
This could be facilitated, for example, by ensuring that training staff are composed of both international experts and local agents. Increased awareness and recognition of the importance of HSE will lead to self-enforcement, something which is particularly crucial given the practical difficulties of emplacing monitoring systems within mining facilities. A2 notes that local workers might not necessarily speak English, and HSE documentation should be available in English, Farsi and any other languages spoken by a large segment of the facility workforce.