Over the last few years, Iran’s economy has been severely damaged by the imposition of sanctions by the US and EU, among other countries, on its financial, banking and energy sectors.

It will take some time for Iran to fully recover from the effects of these sanctions, which had also led to the depreciation of the rial and, consequently, the poor exchange rates that affected the lives of local Iranians. Foreign investors during the sanction period had no option but to close down or significantly reduce their activities.

Evidently the sanctions made it impossible for Iranian banks and their foreign subsidiaries to carry out transactions with the rest of the world, while European banks with representatives operating there had to close down or reduce their activities.

As the largest untapped market with a population of 80 million and with majority under 25 years of age, the lifting of sanctions brings forward a host of new opportunities. For the younger generation, it is to once again travel abroad freely and thus be part of the international community.

Iran has shown keen interest for the entry of foreign businesses with a prior presence as well as for newcomers. There has been a great deal of activity since the finalisation of JCPOA in July 2015, with business leaders from various European countries visiting Iran to seek opportunities in tourism, transportation, technology, foodstuff, aviation and machinery as well as oil and gas.

As the holder of the world’s largest gas reserves and the fourth-biggest oil reserves, the energy sector is the most obvious route for foreign investment into Iran. In November, the Iran Petroleum Contract (IPC) was revealed, which replaced its previous buy-back deals. This is in line with Iran’s widely publicised intention to increase its oil production capacity after the lifting of sanctions under the JCPOA to export at pre-sanctions levels of 1 million barrels a day.

The new IPC contract will cover different stages of exploration, development and production and will be offered to contractors as an integrated package for an estimated duration of 15 to 20 years. Iran hopes to attract around $30 billion of foreign investment necessary to substantiate its intention to increase oil production despite falling oil prices.

Iran has an advantageous position here because the cost of extraction of oil is only $7 per barrel and, therefore, even if the oil price goes down to D$15 per barrel, Iran will still be able to sell at a profit unlike most other oil producing countries.

One area Iran will have to move fast to bring about change is for an effective legal and international arbitration system. Foreign investors would be reluctant to invest large funds if there is a risk that in the event of a dispute it would not get quick justice from the Iranian courts.

One possible option for Iran is to declare that Iranian businesses would be free to agree to international arbitrations in a neutral country on their international contracts. The Iran government must further ensure a change of laws so that international arbitration awards could be summarily enforced in Iran by the Iranian courts under the United Nations New York Convention for Enforcement of International Award.

Now that sanctions have been lifted, it is also imperative that there be a re-establishment of banking channels and corresponding relationships with Iranian banks and their foreign branches and subsidiaries. This process will not be without its complications, nor will it be immediately effective as the US is still retaining sanctions on businesses associated with the Iranian Revolutionary Guards.

Iran will now have to adhere to the international standard of relevant regulatory frameworks and tackle money laundering concerns to regain its share in the global financial community.

Those interested should be aware of the domestic law, particularly in regards to law surrounding investment and corporate law. For example, recent legislation emerging from Iran, such as the Foreign Investment Promotion and Protection Act, has sought to attract and aid foreign investors.

It removed various restrictions on the percentage of foreign shareholding in Iran as well as allowing the possibility of registering an Iranian company with 100 per cent foreign capital. Investors and businesses should therefore seek assistance in navigating the Iranian economy and its complex politics.

While the role of post-sanctions Iran in the global economy is uncertain, it is undoubtedly true that the Middle East’s second largest economy poses a wealth of opportunity for investment and growth. The ability of Iran to harness this potential, however, will ultimately depend on whether the international community embraces the opportunities now available to them.

This will require Iran to put in confidence building measures to attract foreign investors.

The writer is the founder and Senior Partner at Zaiwalla & Co.