Rouhani will meet the pope and the French and Italian leaders on a trip that aims to re-establish economic ties after sanctions

Hassan Rouhani is to make the first state visit to Europe by an Iranian president in almost two decades this week, following the lifting of sanctions against his country.

The trip will aim at rebuilding economic ties and Iran is expected to sign a deal with Airbus for 114 new aircraft.

Europe was Iran’s largest trading partner before sanctions, and has sent an unprecedented number of business delegations to the country since the landmark nuclear agreement with the west was sealed in July. The end of sanctions, including the removal of EU’s embargo on Iranian oil imports, means that trade can begin again.

Rouhani is expected in Rome on Monday, where he will meet the Italian prime minister, Matteo Renzi. He will also meet Pope Francis at the Vatican. He will then travel to Paris on Wednesday and is scheduled to be welcomed by the French president, François Hollande, at the Elysée palace on Thursday.

Germany, Italy and France have been leading the pack as Europe aims to increase trade with Tehran from the current level of €7.6bn (£5.8bn) a year to the pre-sanctions figure of almost €28bn.

Iran’s minister for roads and urban development, Abbas Akhondi, has been quoted as saying that the country is in talks with Airbus for the purchase of 114 new aircraft.

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Tehran has long said it will need to revamp an ageing fleet, hit by a shortage of parts because of trade bans imposed by Washington and other western powers. Mahdi Hashemi, the chairman of the Iranian parliament’s development commission, said this weekend that the country may need as many as 500 new planes over the next three years.

Rouhani was initially expected in Europe in November, but his visit was cancelled at the last minute after the Paris attacks. It will be Rouhani’s first official visit to Europe and the first by an Iranian head of government since 1999, when the reformist former president Mohammad Khatami made similar trips to Paris and Rome.

Iran is a huge market for French car manufacturers, which are eager to do business in the country again. Peugeot used to sell 400,000 vehicles a year in Iran before sanctions were put in place. An arrangement with the local manufacturer Iran Khodro, which assembled the vehicles, meant its cars were ubiquitous across the country.

Local media reported this weekend that Iran Khodro could finalise a new deal worth €500m with Peugeot during Rouhani’s visit to France. “Peugeot 2008 crossover, 208 supermini and 301 compact cars will be manufactured inside Iran under the 50-50 joint venture,” according to the semi-official Tasnim news, which quoted an anonymous Iranian official.

Other French companies, including Alstom, the electricity generation and rail transport firm, the industrial group Bouygues and Aéroports de Paris are also interested in engaging Iran in the post-sanctions era.

“The Rouhani administration is counting on sanctions relief resulting in economic improvements, and if possible, before next month’s parliamentary elections,” said Timothy Stafford, a research analyst at the Royal United Services Institute (RUSI).

“However, there is a danger that it will over-promise and under-deliver. International businesses will think very carefully about the risks of returning to the Iranian market, and even if they do, it will take a long time for the economic benefits of increased trade and investment to be felt,” he said.

“In addition, it is still possible that some of the nuclear-related sanctions that are being lifted will be reimposed for other reasons in the coming months. That is how the US has decided to respond to the ballistic missile tests Iran conducted late last year.”



Five things to watch during Rouhani’s visit

Meeting with Pope Francis

The pope strongly advocated a peaceful resolution to the crisis over Iran’s nuclear programme. He intervened directly, urging Congress not to sabotage the accord during his visit to the US last year, a move that was welcomed by Tehran.

Business talks at Medef, France’s main business confederation

Rouhani is expected to meet Medef’s president, Pierre Gattaz. A number of Iranian ministers, including the oil minister, Bijan Zanganeh, are accompanying the president during his visit. Oil executives from Total and other French business leaders are also expected to meet Rouhani.

No lunch at the Elysée

Rouhani is expected to attend a dinner for Iranian expatriates in Paris, but a lunch reception at the palace, which is usual for state visits, is unlikely to take place because of Iran’s insistence on a longstanding diplomatic protocol that its officials should not participate in events where wine is served.

Fight against Isis

Rouhani will present his country as a key regional player when it comes to the conflict in Syria. Iran, an ally of Bashar al-Assad’s regime since the conflict started in 2011, argues that the west should prioritise the fight against Islamic State and roll back from its position that the Syrian leader must step down as part of any solution. How much he will succeed remains to be seen.

The reaction of European banks

Despite the lifting of sanctions and the desire among European businesses to enter Iran, the continent’s major banks are still reluctant to handle Iranian payments. The US Federal Reserve has issued a 50-page guidance document that says EU banks can now do business with Iran provided they refrain from dealing with certain entities and individuals still blacklisted under sanctions relating to terrorism and human rights. Banks, however, are not yet fully reassured and some say the guidance is open to interpretation.