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Negotiating with Iranians? Build rapport right from the onset.

Oct 26, 2017

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Interview with Bijan Khajehpour, faculty member of the Schranner Negotiation Institute and expert on negotiations with Iranians.

 

Mr. Khajehpour, thank you for taking the time for this interview. The Islamic Republic of Iran is a country of rich cultural heritage. How do these cultural characteristics affect today’s business dealings in Iran?

One could write an entire book in response to this question.  The Iranian culture has a very deep impact on the Iranian behavior including the nation’s business practices.  The pride in representing a millennia old civilization means that Iranian businesspersons are proud and demand respect.  Lack of respect for the Iranian values would be a non-starter in negotiating with Iranians.  A combination of Iranian and Islamic values influence business dealings.  Add to those two orientations some of the tensions and anxieties that are generated by revolutionary ideology (such as distrust towards some of the western nations) and you end up with a picture that is complex and multilayered.

What international businesspeople need to appreciate is that despite the complexity it is possible to decipher how the cultural, historical and political dimensions influence the Iranian approach to negotiations.

 

Is the Iranian culture an important aspect when negotiating with Iranian partners? How’s so?

Absolutely.  Some of the facets where one can detect the footprints of the Iranian culture include:

  • Communication styles, where the Iranian side is used to an indirect style and many others use direct communication. 
  • Time orientations, i.e. a clash between short-term and long-term planning.
  • Formal (Iranian) versus informal communications.
  • Focusing on the person with whom one is negotiating as opposed to focusing on the company or the project.
  • Understanding concepts such as “losing face”.

Having said all of the above, it is also important to underline that there is a generational shift with regards to some of these values.  Iran has a relatively young population and the younger generation tends to lean towards global attitudes in some of the categories.

 

How do Iranians enter a negotiation?

The Iranian approach to negotiations generates challenges but also opportunities.  One challenge is that Iran represents a low trust culture and one needs to gain their confidence. One aspect of gaining trust is the need to be guaranteed of cooperation and that they won’t be in a losing position.  In other words, they need to be assured that they will gain something in the course of the negotiations. 

The opportunity is that the Iranian culture strives to achieve what they perceive as a “just contract”, but at the same time, there are limitations in appreciating “win-win” concepts.  Furthermore, Iranians have a positive attitude towards western technology and expertise. Another noteworthy fact is that Iranians generally like to be perceived as equals in negotiations, despite the existence of a high power distance culture.  This fact translates into a challenge for foreign negotiators who should also show strength – from an Iranian perspective the bargaining process is like a power struggle that should not be won too easily.

 

What is typical of an Iranian negotiation process? Long light conversation etc.?

Though one can see a generational shift, it is still valid to argue that the Iranian negotiation partner is more interested in the person than in the business aspects.  Therefore, there will be a lot of discussion about the negotiator as a person, his/her family, education etc.  Once the Iranian side trusts the foreign negotiation partner as a person, then the business aspects will be dealt with more efficiently.  So, one can divide negotiations into phases, i.e. phase one as confidence-building, phase two as substance of the agreement.  However, it is important to appreciate that the Iranian side will mainly react to the suggestions and initiatives from the other side.  This means that the foreign party has to take the initiative, if the negotiations seem to be stuck.  Waiting for a counter-proposal from the Iranian side may be counter-productive.  As mentioned earlier, the time orientations between Iranian and western negotiators clash in negotiations and one needs to bring a lot of patience to the process.  There may also be situations where the Iranian side imposes a deadline to receive an input and then fails to take the next step in a timely fashion.

 

What is the importance of a relationship in negotiations with Iranian partners?

In general, the Iranians are more relationship oriented, than task oriented.  Relationships take on two distinct roles in negotiations: On the one side, there is the relationship between the negotiators that needs to be developed and nurtured. On the other side, if the foreign negotiator already has a relationship with another “trusted person” (for example from previous negotiations), then that can be used to gain the confidence of the Iranian side. 

 

What are from your perspective the major tactics used in Iranian business negotiations?

In order to show respect for Iranian culture, it is advisable to be prepared to talk about some of the major achievements of the Iranian civilization.  These can be contemporary (such as the fact that Iranian movies have won the Oscars twice in the past few years) or historical such as a reference to the Cyrus Cylinder, i.e. the first historical charter of civil rights from 2,500 years ago.

Furthermore, in order to gain the trust of the Iranian partner, one should be prepared to offer something to the other side early in the negotiations process, such as an offer to hold a training workshop for some of the technical staff of the partner organization or other offers that would represent value for the other side. 

 

What are your 3 main tips how to prepare a negotiation with an Iranian partner?

Apart from participating in an intercultural seminar to learn about the Iranian culture, one should also study some aspects of the country’s history and political realities in order to be able to have an intelligent conversation about topics of interest.  The timeline of the negotiations should be planned in a way that potential delays caused by cultural orientations do not cause a problem – in other words, it is important to have some degree of flexibility to accommodate a potentially slow pace of the process.

 

What are in general the DO's and & DONT's or No Go's?

DO’s:

  • Show respect for the Iranian and Islamic culture;
  • Develop a basis of trust between the persons negotiating;
  • Show long-term commitment to the market.

DON’T’s:

  • Never attempt to lecture the Iranian side.  Though the country may lag behind in terms of technological standards, its elite, especially its engineers are on par with the latest knowledge.  Therefore, never start a sentence by saying: “You should be doing ….”, but always state: “How our company would approach this issue is …”
  • Don’t refer to the Persian Gulf as “Gulf” or anything else;
  • Don’t cause a situation in which an Iranian partner may lose face – this could happen, if a communication from you leads to the belief that an Iranian partner has made a mistake.

NO GO’s:

  • Do not initiate to shake hands with the opposite gender (this is forbidden under Islamic rules);
  • Do not enter into relationships that may be understood as support for one of the political factions or networks.

 

We have recently witnessed the biggest vote of confidence in Iran by France’s Total and China’s CNPC, who have signed a deal worth almost $5 billion. Would you say that it is necessary for global companies to establish partnerships with local players when expanding into Iran?

It is theoretically possible to approach potential projects through an own subsidiary, but it is advisable to identify and team up with an Iranian partner.

There are four dimensions to this question, i.e. political, legal, emotional and operational.  Politically, the Iranian government insists on the transfer of knowledge and technology to the Iranian side and the best way to manifest this transfer is a local partner.  Legally, international contractors are obliged to maximize what is known as “local content”.  Emotionally, partnership with a local company underlines the foreign entity’s commitment to the market.  Operationally, the local partner can help navigate the local complexities (such as dealing with organizations such as Customs, labor ministry etc.) and increase the efficiency of the project. 

 

What is your personal opinion about the Iran Nuclear Deal? Do you think it will hold, following President Trump’s comments at the UN Assembly?

I consider the Nuclear Deal as a major achievement in international diplomacy and something that can be used as a model for other international crises.  For now, President Trump wants to keep everyone guessing about his next actions, but a politically sound decision would be that all parties including the US remain committed to the Deal also known as JCPOA.  I believe that the ultimate goal of the Trump administration is to amend the JCPOA, especially to extend the limitations beyond its existing sunset clauses.  Unfortunately, President Trump thinks that threatening to withdraw from the deal will force the Iranians to immediate renegotiations.  The opposite is true, i.e. if you want to renegotiate, then one needs to honor the JCPOA and show respect to Iran and gradually pave the way for a new accord to be negotiated.  Another reason, not to renege on the JCPOA is that it could serve as a model for a potential multilateral deal with North Korea.

Anyhow, my prognosis is that the Trump administration will go cold on the JCPOA by introducing more sanctions on Iran, but that all other parties will remain committed.  Tehran has also stated clearly that it will comply as long as the others, especially the European Union remains committed.