On a May afternoon in Tehran, a Russian in a dark suit sits in the crowded lobby cafe of the Espinas Persian Gulf International Hotel with his Farsi translator, sipping coffee with potential Iranian partners while discussing the price of soy fiber. No sooner do they vacate their armchairs than another group of besuited businessmen takes their place, this time conversing in Italian and Farsi about industrial motors.

The Espinas, one of Tehran’s few luxury hotels, opened in 2009, just as successive rounds of sanctions over Iran’s nuclear program were drawing an ever-tighter noose around the economy. With the restrictions biting, the Espinas’s lobby, adorned with pink-granite columns and faux Achaemenid sculptures, emptied out.

Today, amid glimmers that sanctions will be lifted, finding a room at the Espinas isn’t easy.

“All the five-star hotels are full of Western companies looking to position themselves to do business — and also Japanese and Chinese companies,” says Sarosh Zaiwalla, a London-based lawyer who specializes in sanctions regulation and travels frequently to Tehran.

Iran has seen a surge in the number of Western business delegations, says Amir Cyrus Razzaghi, the head of Ara Enterprise Group, a consulting firm in Tehran that provides market research and business intelligence to clients.

In February, a group representing more than 100 French companies — including engineering group Alstom, telecom company Orange and carmaker Renault — visited Tehran, the largest foreign-trade mission the country had hosted. Groups from Canada, Europe and the United States have also come. Companies that were once active in Iran, such as French oil giant Total and ArcelorMittal, the world’s largest steelmaker, have expressed interest in returning.

Iran — one of the world’s largest closed markets — may be on the verge of opening for business after years of isolation, says Charles Robertson, chief economist at Renaissance Capital, a London-based investment firm. “This is the last major opportunity out there in the world that can suddenly become accessible, almost overnight,” he says.

Robertson, who visited Tehran in February, compares Iran to Turkey in 2004, when that emerging market was poised for what turned out to be almost a decade of strong economic growth.

What’s raised investor expectations about doing business there is a diplomatic breakthrough that could clear the way for sanctions to be lifted. Brokered with Iran in November by the United States, China, Germany, France, Britain and Russia, the deal eased some sanctions temporarily in exchange for Iran’s commitment to curtail uranium enrichment and allow greater oversight by the International Atomic Energy Agency.

The Joint Plan of Action, or JPA, released $4.2 billion in Iranian funds frozen in foreign banks and suspended sanctions on petrochemical exports, gold trading, the sale of goods and services in the automotive industry, and the supply of parts and maintenance needed to keep Iran’s civilian aircraft flying safely.

Iran has been struggling under layers of sanctions by the United States, the European Union and the United Nations over more than three decades.

The U.S. measures, some of which date to the Iranian Revolution in 1979, are the strictest. U.S. citizens are barred from doing business with Iran without a waiver from the Treasury Department. Foreign companies that trade with Iran risk being fined and cut off from the U.S. market, a threat that has driven European firms to abandon Iran.

The U.N. sanctions primarily target individuals and entities tied to Iran’s nuclear program, while E.U. sanctions have tightened and broadened over time to include Iranian oil sales and banking.

The November JPA set a July 20 deadline for a final settlement on Iran’s nuclear program. As the clock ticked down, that deadline was pushed to Nov. 24. The extension freed up another $2.8 billion of Iranian money that was frozen in foreign bank accounts.

Meanwhile, in July, as Israel and Iran-backed Hamas forces in Gaza exchanged missile fire in another outbreak of fighting, Israeli Prime Minister Benjamin Netanyahu warned the United States against doing a “bad deal” with Iran.

Other events in the region have drawn Iran and the United States closer. With Syria’s civil war spilling over into Iraq, the United States and Iran both rushed to help Iraqi forces counter the threat posed by Sunni extremists. If a conflagration disrupts Iraqi oil production, Iran’s reserves, the fourth largest in the world, will become important to world markets.

Iran has 76 million people, about the same number as Turkey. It consumes more steel annually than Britain or France, according to the World Steel Association. And the Tehran Stock Exchange, or TSE, has a market capitalization of about $135 billion, three times the value of the main stock market in Vietnam, with a population of 89 million.

While once-embargoed markets such as Burma and Libya lack developed financial markets and physical infrastructure, Iran has both, Robertson says — offering opportunity that’s “just huge.”

The man who helped organize Robertson’s trip to Iran is Ramin Rabii, the managing director of Turquoise Partners Group, a Tehran investment firm, with $200 million under management, that is the first port of call for investors.

“This is one of the most attractive markets in the world in terms of its long-term potential,” Rabii says.

Turquoise was set up in 2005 to provide a way for foreigners to invest in the TSE. Sanctions, however, halted that in 2010. Since the JPA was signed, Rabii says, he’s received half a dozen e-mails a week from investors.

Most sanctions remain in place. And if businesses eying Iran needed any reminder of the force of those measures, they got one June 30 when BNP Paribas, France’s largest bank, agreed to pay $9 billion for violating U.S. sanctions on Iran, as well as on Sudan and Cuba.

Poised to pounce

Still, companies — particularly those that sell pharmaceuticals, medical devices and consumer goods subject to fewer restrictions — would be foolish not to draw up contingency plans to enter the market, says Matthew Spivack, a consultant at Frontier Strategy Group. “Not having a plan in place, not thinking about it, is what will put you behind,” he says.

Among those that have publicly expressed interest in Iran is Canadian transportation company Bombardier.

“Our role now is to understand when sanctions could be lifted and how we could take advantage of a market we feel will be important for our products,” said Pierre Beaudoin, Bombardier’s CEO.

Beaudoin’s bland statement belies the bounty of contracts that could await if Iran opens up.

The Iranian government has said it’s looking to buy 400 passenger planes — including regional jets and turboprops — within 10 years to upgrade its aging fleet.

Bombardier could compete for some of that business. The Tehran government has also unveiled plans to spend $10 billion improving the capital’s public transport system in the next five years, including buying 2,300 metro-rail cars, which Bombardier also produces.

Companies based in Europe, which departed Iran in the past four years as sanctions tightened, have been most conspicuous in jockeying to return — leaving U.S. firms behind.

‘Getting lapped’

“There is a sense that they are getting lapped by the Europeans,” says Reza Marashi, of the Washington-based National Iranian American Council. “The Europeans didn’t sanction themselves out of influence in Iran like we did.”

Asked at a news conference about U.S. criticism of French businesses, including Total, that have held exploratory talks with Iran, Total CEO Christophe de Margerie said, “When it becomes legal to work in Iran and contractual terms are satisfactory, I don’t see why Total would deprive itself of the possibility to beat out its Anglo-Saxon competitors in Iran.”

Iran’s overtures to investors date from Hassan Rouhani’s election as president in July 2013. Rouhani succeeded Mahmoud Ahmadinejad, an anti-U.S., anti-Israel populist who had accelerated Iran’s uranium enrichment efforts. Ahmadinejad bequeathed to Rouhani an economy crushed by international sanctions.

By summer 2013, oil production had fallen to a 20-year low of 2.5 million barrels a day, down from a peak of 4 million barrels a day in 2008.

From 2012 to Rouhani’s election, the Iranian rial plunged more than 60 percent against the dollar as inflation spiraled out of control, the United States prohibited international banks from trading or holding rials, and Iranians rushed to buy gold and foreign currency.

Real gross domestic product fell 5.6 percent in 2012 and a further 1.7 percent in 2013. The economy is forecast to grow 1.5 percent this year, according to the World Bank.

Rouhani has cast aside the Ahmadinejad playbook. At the World Economic Forum in Davos, Switzerland, in January, Rouhani invited CEOs and financiers to “come and visit Iran to see the investment opportunities.”

Martin Sorrell, CEO of WPP, the world’s largest advertising and marketing group, met privately with Rouhani. “I was impressed,” Sorrell says. “It seems he is bent on changing Iran’s relationship with the West.”

Sorrell says WPP has begun researching Iran’s business potential.

On Aug. 10, Rouhani lashed out at hard-line critics in his country who oppose negotiations with the West over Iran’s nuclear program. “Fear of interaction, fear of negotiation and fear of understanding is wrong,” he said, according to the Iranian Students News Agency.

David Levine, a lawyer in the Washington office of McDermott Will & Emery who specializes in U.S. sanctions law, says firms exploring business opportunities in Iran should tread carefully. “The downside risk is severe,” he says, citing penalties including prison and fines.

Businesses also need to be wary of U.S. political pitfalls and public opinion, says Henry Smith, a senior consultant and Iran analyst at Control Risks Group Holdings, a consulting firm.

General Electric was so concerned about a public backlash to its work repairing engines on Iran’s civilian airliners — a transaction authorized under the JPA and for which the U.S. Treasury has granted waivers — that it promised to donate any revenue from it to charity.

Then there’s United Against Nuclear Iran, a group that pressures companies to cease doing business with Iran.

“This is a regime that sponsors terrorism and supports entities that maim and kill U.S. troops around the world,” says David Ibsen, executive director of UANI.

The biggest prize for Western companies is likely to be Iran’s energy industry. The government plans $100 billion in oil and gas projects over the next four years.

Energy projects

Iran will need outside expertise to boost crude production significantly, says Robin Mills, who is head of consulting at Manaar Energy and traveled frequently to Iran as a Royal Dutch Shell geologist in the 1990s.

Within weeks of the JPA announcement, Iranian Oil Minister Bijan Namdar Zanganeh met in Vienna with the chief executives of two oil and gas companies, Italy’s Eni and Austria’s OMV. “Approximately every week, we have meetings with the delegations of these companies,” says Akbar Nematollahi, the Ministry of Petroleum’s spokesman. “There have even been negotiations with American companies. They are ready, too.”

Nematollahi declined to name the U.S. firms.

In May, 1,800 exhibitors crowded Tehran’s sprawling International Permanent Fairground for Iran’s annual International Oil, Gas, Refining and Petrochemical Exhibition. The petroleum ministry said 600 foreign companies attended, although many were small Chinese and South Korean firms.

Jerome Budin, an international manager at Rotork Controls, an electric-valve-maker based in Britain, was among the few Europeans staffing an exhibitor’s booth. Budin says Rotork has attended the fair for 12 years and sold products to Iranian petroleum, water and power companies after securing the necessary licenses. “It’s quite a big market for us,” Budin says. “Obviously, we are looking forward to an easing of the sanctions.”

Western auto companies are also revving their engines over Iran. In 2013, even though U.S. sanctions on the auto industry were in place, Iranians bought more than half a million new vehicles; most of those were domestic models manufactured by Iran Khodro and Saipa Automotive.

In January, Renault CEO Carlos Ghosn said this figure could increase threefold if sanctions were fully lifted. The JPA temporarily removed sanctions on the auto industry, and Renault, Europe’s third-largest automaker, has resumed shipping kits that its Iranian partners, Iran Khodro and Pars Khodro, assemble into vehicles. Renault had abandoned the market in 2012 because of sanctions.

French automaker Peugeot had been Iran’s leading car supplier, with a 30 percent market share, before it withdrew in 2012. In the spring, its executives traveled to Iran to talk about coming back, spokesman Pierre-Olivier Salmon says.

The JPA’s temporary nature, along with continued banking restrictions, has kept the brakes on big business deals. Furthermore, despite the deadline extension, the two sides remain far apart on restrictions to Iran’s uranium enrichment capacity, and a final deal might prove elusive.

Even in the event of a deal, Control Risks’ Smith says, sanctions wouldn’t vanish overnight; they would probably be eased in phases tied to Iranian compliance. In Britain and the United States, for example, some sanctions can be lifted only if legislatures change the law, a time-consuming and uncertain process.

Many U.S. laws restricting trade with Iran predate concerns about Iran’s nuclear program and are related to Iran’s alleged sponsorship of terrorism and human rights abuses. Anti-Iran hawks in Congress may seek to keep restrictions in place — and lifting all U.S. sanctions is not under discussion, Smith says.

Mark Dubowitz, who runs the Foundation for Defense of Democracies, which advocates that Washington take a hard line on Iran, says he opposes allowing Iranian banks to participate in global finance too quickly, on grounds they have funded terrorism and laundered money.

“These are bad banks,” he says. “These banks should have to go through a long rehabilitation process where they demonstrate they are no longer a threat.”

In Tehran, for all the buzz in the Espinas lobby, the JPA has provided little economic uplift. Daily life for most of the capital’s 7.2 million people grows ever more difficult as food and fuel prices continue to rise. Iranians have little choice but to cling to the notion that things will get better, Ara Enterprise’s Razzaghi says.

“Very little concrete new business is being generated,” he says. “So, yes, people live in hope — if only because the alternative is too terrible to contemplate.”

The full version of this Bloomberg Markets story appears in its September issue.