Small and medium-sized companies are entering Iran’s market to replace big companies that have scaled down their operation to avoid sanctions, western diplomats say.

Partly as a result of this switch EU exports to Iran during the first four months of this year went up by 17.8 per cent after a three-year decline despite international sanctions over the country’s nuclear programme. Exports by Italy rose by 33 per cent, France by 30 per cent and Germany by 17 per cent, while the UK’s went down by about 8 per cent, according to figures from the EU’s statistics office Eurostat.