Even with a nuclear deal, doing business with Iran is risky
A possible international deal between global powers and Iran’s theocratic establishment, which will trigger the lifting of sanctions on Tehran, could create the impression that it is safe to do business with the Iranian regime or invest in the Iranian market.
The temptation to invest in Iran may be great given that it is “the last major untapped emerging market in the world,” according to one investment firm. There are also opportunities in almost all sectors and the economy urgently needs new capital.
With the relaxation of sanctions, the country’s global legitimacy would improve and foreign companies could operate there. Iran would rejoin the international community, international banking and financial systems, and the open market for oil. This would be particularly beneficial as the Islamic Republic has the world’s second-largest natural gas reserves and fourth-largest proven crude oil reserves, and the sale of these resources accounts for more than 80 percent of its export earnings.
But businesses and corporations should resist the temptation to rashly invest in the Iranian market for several reasons. First, an international deal with the Iranian regime over its nuclear program is not set in stone and either party could withdraw without explanation; this would trigger the re-imposition of sanctions and jeopardize foreign investment.
One risk factor is that Tehran secretly advances its nuclear program and, if caught, the deal could fall through. Finally, the Iranian regime has a history of deceiving the International Atomic Energy Agency by conducting clandestine nuclear activities, as happened in Arak, Natanz and Fordow after signing the original Joint Comprehensive Plan of Action in 2015. A year into this deal, two credible and timely intelligence reports showed that Iran had no intention of honoring it.
A report came from the Institute for Science and International Security, which revealed that Tehran had attempted to buy many tons of controlled carbon fiber, which “raised concerns about Iran’s intention to honor its JCPOA commitments.” And Germany’s domestic intelligence agency, the Federal Office for the Protection of the Constitution, revealed in its 2016 annual report that the Iranian government was pursuing a “secret” route to obtain illegal nuclear technology and equipment from German companies “whatever, even by international standards a quantitative high level.” It added: “It can be assumed that Iran will continue its intensive procurement activities in Germany using secret methods to achieve its goals.”
Another risk factor comes from the main international player, the US. When then-President Barack Obama sealed the nuclear deal with Iran, it was assumed that all future US presidents would abide by the deal. But that was not the case, because Obama’s successor, Donald Trump, pulled the US out of the deal because he considered it weak. Therefore, even if Joe Biden strikes a deal while he is in the White House, there is no guarantee that the next US President will stick to it and not re-impose sanctions on Iran.
Businesses and corporations should resist the temptation to rush to invest in the Iranian market for several reasons
dr Majid Rafizadeh
Furthermore, since Iran’s economy is state-controlled and the Islamic Revolutionary Guard Corps and Supreme Leader Ali Khamenei enjoy a monopoly over the country’s industries, any foreign business or investment will most likely benefit them in the first place. This will enable them to more vigorously pursue their military adventure and hegemonic ambitions in the region.
In addition, investing in a foreign country requires political stability. Political stability prevails in several Middle Eastern countries, including Kuwait, Bahrain and Saudi Arabia, but not in Iran. Domestically, Iran is always on the brink of a nationwide uprising. While the regime has managed to quash previous large-scale protests, the deep anger of millions of Iranians continues to simmer beneath the surface. Each flashpoint could fuel their frustration and anger again, and nationwide protests could ultimately threaten the power of the ruling mullahs.
The economic suffering of the people is not the only reason for the recurring protests. Other reasons include general dissatisfaction with the political establishment over its widespread corruption, human rights abuses, repression of freedom of speech, of the press and of assembly, and the absence of the rule of law and the judiciary. This is evident in the people’s chants against Khamenei and his government, such as “Islamic Revolution was our fault” and “Down with the Islamic Republic”.
Companies looking to invest in Iran should be aware that these protests will not go away completely. They can resurface at any time and have the potential to quickly become widespread demonstrations, making them impossible for the IRGC to subdue, no matter how powerful the regime’s forces are.
Even with a return to the nuclear deal, investing in Iran and doing business with the regime in Tehran are dangerous due to the country’s socio-political instability and the inherent risk of the deal collapsing, triggering renewed imposition of sanctions on the Islamic Republic.
* dr Majid Rafizadeh is a Harvard-educated Iranian-American political scientist. Twitter: @Dr_Rafizadeh
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