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Negotiating in Iran

Wednesday, 21 September 2016

Negotiating with Iran


Negotiating business deals across cultures is always a challenge. It is even more so for a country like Iran, who until January 2016, was effectively cut off from the world trading system for nine years. While tremendous opportunity exists, considerable barriers remain. There are still complex issues regarding transparency and compliance in the banking systems of all the parties involved in the agreed nuclear deal, known as the Joint Comprehensive Plan of Action, that need to be resolved before significant trade with Iran can resume. At present, major European banks and businesses, especially those with any US connections, are weary that they will be unwittingly snared in the remaining web of US regulations if they re-engage with Iran. Trust between Iran and the West is still at a very low point, and as is well known, any successful business relationship relies on a degree of certainty on which that trust can be based. Therefore, it is important to realistically ground expectations as to how long your negotiation process will take to play out.


The comments in this article are based on the research that I have done in preparing a new executive training seminar for British businesses and their professional advisors for the Centre for International Studies and Diplomacy at the School for Oriental and African Studies (SOAS) at the University of London called “Corporate Diplomacy: Negotiations between Iran and the West”, which is supported by the Middle East Association, the British-Iran Chamber of Commerce, the Foreign Office, and the new Department for International Trade. The program is based on the Harvard method of “Principled Negotiation”.


I personally have never been to Iran, but I have interviewed Iranian trade negotiators who were observers at the World Trade Organization in Geneva when I worked there in 2007; politicians and diplomats from the UK and US who were personally involved in the nuclear talks concluded in Vienna in July 2015; with Iranian journalists who covered those talks; foreign businessmen who worked in Iran before the sanctions were imposed; Iranian businessmen and lawyers living in London; as well as delving into the writings of academics and business intelligence analysts who study Iran. The combined input of this information and insights from players directly involved with Iran has enabled me to develop a composite picture of what you can expect to encounter in your business negotiations there.


The persona of the Iranian negotiator


              The psychologist Carl Jung defined the term “persona” as the social face the individual presents to the world — "a kind of mask designed on the one hand to make a definite impression upon others, and on the other to conceal the true nature of the individual". Iranian negotiators tend to approach a discussion with a combination of “grandeur and grievance”. They come to the bargaining table with a view that their nation’s history, despite the glories of the distant past, has too often featured defeat, tragedy, victimization and betrayal. This leads them to the perception that the West is not really negotiating, but using its superior economical and political muscle to compel Iran to accept an unequal agreement.


Iran is a highly educated, very sophisticated society. Yet the Iranian tendency towards pessimism and conspiracy, their ingrained mistrust of the “other”, and their perception of “us against the world as the only Shiite nation ”, creates an exaggerated view of the significance of any concessions they are asked to make. Iranian negotiators tend to be in a defensive mode of minimizing losses and not necessarily maximizing gains. Negotiations are not born of opportunity, but of necessity.  As a result, Iranian risk propensity – willingness to hold out for better terms – tends to be higher than that of Western negotiators. The intrinsic Shiite belief in the virtue of patience also contributes to this tendency.


Western business negotiation techniques are based on dynamics in which anything can happen. The underlying premise is that as long as there is a common denominator, that both sides effectively want the talks to succeed, the step-by-step give and take process will produce the inherent compromise and a mutually acceptable solution. When Western companies bargain, they are not averse to creating tension or even a minor crises as part of the negotiation process. It’s a tactic to try and gain advantage over the other side. Bluffing and disinformation are legitimate tools, though they should be used with caution and not used in a manner that could break long-term trust and endanger the post-negotiation relationship. After all, all business relationships must be based on a degree of trust.


              Iranian negotiation tactics go even further than the Western model in using potential trust-damaging tactics, which can make forging a business relationship far more challenging. The important thing here to recognize, is that such tactics are far more culturally driven in Iran than they are in the UK. I will identify these tactics for you with their Persian names, because these terms will often come up when Iranians are trying to explain their actions to you.


              To start with, Iranian’s admire a clever argument. They call this cleverness, zerangi, which in the psyche of the Iranian negotiator gives him legitimacy to make dramatic departures from the course of the talks, as well as using threats, bluffing, and disinformation. A negotiator who is adept at discourse manipulation is highly esteemed in Iran. This is further reinforced by the Shia religious concept taqiya that provides social legitimization of deception in the service of necessity or a higher good. There is a Persian saying “a lie which brings benefit is preferable to a truth which causes damage.”


              An interesting trait of this cleverness is the Iranian tendency to enter into detailed negotiations over issues that the Iranian side knows it cannot deliver even if its demands were to be met. Some see this as a negotiating ploy, meant to wear out the adversary with “virtual negotiations” and to learn his weaknesses before raising real issues.


              Much of the literature on this subject attributes this tactic as a manifestation of the “bazaar instinct” and the pure “love of the bargaining game”. Often, a demonstration of rhetorical, emotional, and intellectual virtuosity while bargaining raises the status of the Iranian negotiator in the eyes of his colleagues and subordinates, which for him, is a way to score points in his society, and is separate from the real goal of the negotiations. Cleverness to the Iranians is a sign of strength and determination. When their foreign counterparts mirror such tactics, it will not offend them, it earns them grudging admiration.


              Western negotiators should not convince themselves that the Iranians will never be so foolish as to do “X.” Such a statement can become a guarantee that they will do precisely that - driven not by foolishness, but by logic and necessities that the outside observer does not see or understand. In commercial dealings in the oil and gas sector, Iranian negotiators are known to have sabotaged an entire deal rather than make some minor concessions. The Iranians have a term for this: mard-e rendi, someone who outsmarts himself through pursuing short-term gain with a single-mindedness that blinds him to the larger and long-term issues at stake.



              Western negotiators can be more effective if they try to understand and tap into the Iranian sense of pragmatism, which is embodied in the Islamic principle of “the predominance of public interest”. Once it is clear to the Iranians that only compromise can avert a serious threat, the compromise will become a legitimate choice. The Persian term for this principle of public interest is maslahat, and it became government policy in Iran in 1988.


How Iranian negotiators calculates their BATNA


              Iranians tend to set a relatively high Best Alternative to a Negotiated Agreement (BATNA), thus demonstrating willingness to walk away from the table at an early stage of negotiations. They primarily view their BATNA as time-dependent. A better alternative may not exist for them presently, but it may arise in the future, hence there is no reason to concede now, which is why negotiations with them tend to be drawn out affairs.


              The Iranian negotiator’s BATNA may be difficult to predict. In some cases, they may be unwilling to make any agreement in case they come under criticism from political adversaries at home for selling out to the foreigner. In their current economic environment, they will be under great pressure not to grant foreign firms market share unless they get the trade-offs they need in terms of technology & skills transfer, and job creation. For years they have survived on an import-substitution manufacturing base, and it has created a culture of self-reliance, which they are not about to give this up easily.


              Iranian negotiation strategies are notoriously short-term focused. They do not often see the trust that the deal builds as an asset that may be worth making concessions for. Very rarely will they offer a deal in which the long-term benefits from dealing with the other side emerge years later. In this respect, Iranians are very different to the Chinese.


Identifying the Iranian players both at and away from the bargaining table


Iranian businesses have been known to make extensive use of back channels and pre-negotiations. An important characteristic of these indirect interactions is their tendency to maintain a number of active channels of communication simultaneously. In many cases, these channels are no more than a mechanism for gathering operational intelligence prior to the actual negotiations; for sounding out the rival’s weaknesses and positions; and to identify disagreements within a rival's team. However, the multiplicity of these go-betweens, each with their own personal and political agendas, working within the distrustful nature of Iranian society with its complex web of vested interests and unidentified stakeholders, creates competition amongst them, with each making promises to bring home the “prize”.


This can often lead to foreigners paying consultant fees or facilitation payments, all of which need to be done under the strict scrutiny of the UK Bribery Act. Remember, Iran ranks 130 out of 168 countries on the Transparency International Corruption Index. Remember, that roughly 70% of Iran’s economy is state-controlled or in the hands of “parastatal organizations” such as the Iranian Revolutionary Guard Corps. (IRGC) and “bonyads”, the Iranian term for foundations, which are in fact, semi-private organizations of clerics, current and former government officials who have monopolistic control of the import and distribution of various categories of items and exercise non-transparent control over the distribution of significant amounts of state money.




              You cannot separate business from politics in Iran. Nor can you separate religious ideology from business considerations. It is an Islamic Republic. For the Iranian negotiator, the test of an agreement is not whether it conforms to International Law, which is often regarded as a pre-text for foreigners to cheat Iranians out of their rights, but whether it can be presented as a victory for Shia Islam and Iran, this will be especially true for large-scale infrastructure projects and involvement in vital industries like the oil and gas sectors. Iran is in a titanic battle with the Sunni countries of the Gulf region. Everything has the potential to become a zero-sum game to them.


Strategies for Western negotiators dealing with Iran


              While maintaining the integrity of the process – grounded on legal principles - Western business negotiators should look for unambiguous, mutually agreeable standards that avoid legal jargon and technicalities. In a negotiation, Iranians may frame their demands, not in specific or quantitative terms, but in qualitative terms that claim, “All we are seeking is justice” or “We want our rights”. It is important to remember that the Iranian concept of justice, rights and sense of fairness is closely tied to their religions and political histories. Try to avoid agreements that are open to interpretation between the letter and the spirit of the law.


              In a relationship of perceived inequality, the main goal of Iranian negotiators becomes to obtain “respect” or at least reaching an agreement that they can present as showing Iran to be any country’s equal. This sense of inequality can create its own vicious circle. Because the Iranian negotiator comes to suspect that any arrangement the Western side accepts must, by that very fact, be unfair to the Iranian side, they believe they will get more if they hold out – so they will refuse to close the deal. If the Iranian negotiators do get more, then their original suspicions are confirmed, they remain suspicious that even the new and better deal is unfair to Iran. If it weren’t, why would the other side have accepted it?


              It is worthwhile going to Iran to explore the opportunities of working together, but if those talks stall, resist the temptation to immediately conclude that the Iranians are irrational, unpredictable or cannot recognize what may be in their own best interests – maintain a non- judgmental tone – separate the person from the problem.


              I would suggest that if you seriously want to trade with Iran, whether you are an SME or a multinational, that you seek out the advice of cultural experts who can help you understand the conceptual points drawn from their history and religion which underlie the ingrained attitudes and actions of your Iranian counterparts.


              Carefully identify not only your business interests and needs but also that of the people you are trying to do business with. Most importantly, you know you are dealing with an opaque society with a low base of trust, so to avoid compliance problems, have your negotiators start a process of mapping out the relationships and lines of authority of all the decision makers, stakeholders, external influencers, back-channel representatives of any Iranian company you attempt to do business with, as well as their supply-chains. It is a technique in negotiation planning called backwards mapping, and this should constantly be updated with each round of bargaining and completed before you conclude any deal.










Samuel Passow is the Managing Director and Founder of the Negotiation Lab Ltd. based in Canterbury, England. He was trained as a negotiator and mediator in the United States at the Program on Negotiation at Harvard Law School and the Kennedy School of Government where he received a Masters Degree in Public Administration and was a Research Fellow case writer at the Harvard Center for Business and Government. He is the author of numerous books and articles on negotiation, mediation, crisis management and international trade.


samuel.passow@post.harvard.edu  www.negotiationlab.co.uk


Copyright© 2016 by Negotiation Lab Limited (UK). Distributed with permission. All rights reserved. 


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