Insider news & Analysis in Iran

By INU Staff

INU - This week, there was a seemingly unusual outpouring of stories in Iranian state-affiliated news sources which claimed that Iran was looking forward highly positive economic prospects. But long term coverage of Iranian financial news in the global media has tended to present a far more uncertain picture. In fact, the reports now coming directly out of Tehran may be specifically intended to compensate for more objective assessments at a time when the Islamic Republic is fairly desperate to attract foreign investment.

In one example of this phenomenon, Fars News Agency reported upon talks that Iranian officials had held with the Eurasian Economic Union. Iranian officials declared that the meeting signified the imminent expansion of trade with the five EEU member states, Belarus, Kazakhstan, Russia, Kyrgyzstan, and Armenia. The Fars report also quoted Iranian Foreign Minister Javad Zarif as saying that Iran and the Union would soon be implementing preferential tariffs. However, this claim was not backed up by the announcement of any formal agreement or corroborating statement from the EEU or its member states. Instead, Zarif merely declared that negotiations on the topic had concluded and that an agreement would be signed “soon”.

The Islamic Republic News Agency provided somewhat more corroborating evidence for the claims in its report on prospective economic ties between Iran and Afghanistan, but the report glossed over notable details that can be expected to complicate any mutual efforts to pursue those ties. It indicated that the chief Afghan consul in the Iranian city of Mashhad had called for economic matters to be given precedence over security topics in talks between the countries. Seyed Nurollah Raghi also reportedly said that economic cooperation between Afghanistan and Iran had been positive, but remained in need of growth.

But Raghi also called attention to a possible source of tension, arguing that the Iranian government’s attitude toward ethnic Afghans must improve in order to facilitate economic opportunities. The IRNA report presumably highlighted these remarks in order to suggest that Tehran would be sensitive to the recommendation, but there is substantial evidence to suggest otherwise.

Afghan immigrants to the Islamic Republic of Iran are largely treated as second class citizens, generally being denied access to lawful employment and other civil rights. The Iranian Revolutionary Guard Corps has also exploited this situation in order to recruit Afghan refugees for paramilitary groups fighting in Syria and elsewhere, in exchange for the offer of working papers and permanent resident status. At the same time, the IRGC and other security forces have reportedly been spearheading a worsening crackdown on ethnic minorities.

This trend is ongoing, and there is little reason to suppose that the Afghan minority will be isolated from it in the near future. If this is indeed an area of concern for Afghani officials and diplomats, then it stands to reason that economic ties between their country and the Islamic Republic of Iran may be strained, regardless of mutual interest in the expansion of these ties.

On the other hand, there has been longstanding speculation about other threats to the established cooperation between Iran and some of its allies, and some of these threats have failed to fully manifest. For instance, at the height of the Syrian Civil War it was widely suggested that divergent Iranian and Russian interests in that area could be leveraged by Western powers to diminish the strength of the alliance. But more than six years after the outbreak of the war and more than two years after the advent of full-scale Russian intervention, the Russian-Iranian alliance appears to be as close as ever.

Naturally, this closeness has both a security and an economic dimension, and the recent outpouring of Iranian state media has sought to highlight the latter.

Tasnim News Agency, an outlet with close ties to the IRGC, recently boasted of Iranian Prosecutor General Mohammad Jafar Montazeri’s planned participation in a meeting of the Shanghai Cooperation Organization, which concludes on Thursday in St. Petersburg, Russia. In addition to holding talks with representatives of the eight-member SCO, Montazeri was also scheduled to hold direct sideline discussions with Russian officials, according to Tasnim.

This reporting suggests persistently strong economic ties with Russia while also pointing to the supposed potential for those ties to translate into the expansion of economic opportunity for Iran in other countries, including countries with relatively weak ties to the West. But even if this potential is as robust as the Iranian media outlets seem to be suggesting, it is not clear that it is sufficient to make up for a prospective shortfall in European investments involving the Islamic Republic.

Tehran’s interest in attracting such investment was arguably underscored by a report that was published on Tuesday by the Financial Tribune, which bills itself as the “first Iranian English economic daily”. The article quoted Mohammad Khazaei, the head of Iran’s Organization for Investment, Economic and Technical Assistance as boasting that these investment prospects are already emerging and also that they should be considered safe because of the focused intentions underlying Iran’s spending of prospective investment capital.

“Following the nuclear deal, we are increasingly witnessing proposals and negotiations for foreign finance deals with our country, and the government along with the private sector is ready to guarantee these funds and welcome them,” he said according to the report.

The Tribune went on to claim that Iran had already fully secured 26 million dollars’ worth of foreign investment agreements from both Asia and Europe, and also that a further 35 million dollars’ worth of agreements “are currently in the final stage of talks”. It also quoted the Central Bank of Iran’s Vice Governor Akbar Komijani as saying, “This shows that Iran has remained faithful to its foreign exchange commitments.” In a transparent reference to American sanctions and the Trump administration’s increasingly assertive Iran policy, he then immediately added, “If not for political pressures, other nations are ready to invest in the country.”

Iranian officials have repeatedly endeavored to portray US sanctions as unjustified and politically motivated. Furthermore, wherever Iran’s economic recovery has appeared to falter in the wake of the 2015 nuclear agreement with six world powers, those officials have tended to blame the persistence of non-nuclear sanctions beyond the implementation of that deal. But this talking point is undermined by international reports pointing to the ways in which Tehran has declined to shore up the perceived security of foreign investments in the Islamic Republic.

Despite its recent outpouring of reports about heightened economic prospects, Iranian state media has also acknowledged some of the deliberate deficiencies of its economic policy. The National Council of Resistance of Iran issued a report on Tuesday that included relevant excerpts from Iranian state media regarding the prospects for Iranian compliance with the Financial Action Task Force, which assesses the danger of money laundering and other financial crimes in nations throughout the world.

Iran technically has until the start of 2018 to bring itself into line with the requirements of the FATF, but it is not clear whether the regime in Tehran will allow this to happen. Editorials in state media have linked this issue to recent propaganda regarding an “axis of resistance” that includes Iran-backed terrorist groups like Hezbollah, and they have claimed that Western powers will use the FATF to declare such “resistance” to be a violation of international commitments.

In a larger sense, this hardline commentary underscores the persistent unwillingness of Iranian officials to cooperate with the international community, even when doing so may have substantial economic benefit for the Islamic Republic. This lack of cooperation, together with the specific and persistent danger of Iranian money laundering, may be a major reason why the World Bank’s Doing Business report for 2018 contradicts the rosy picture painted by Iranian state media, moving Iran down four places to 124th out of 190 countries, compared to the previous year.

Although another Financial Tribune article attempted to boost perceptions of Iran’s investment security by pointing to a reported eight percent rise in non-oil foreign trade compared to last year, it appears that such indicators may prove relatively unimportant over the long term, as Iran faces persistently challenging conditions for both foreign investment and economic development.

According to Azer News, the World Bank report specifically highlights the prevalence of inefficient economic policy, political instability, and endemic corruption as reasons why foreign investors may be wary of the Islamic Republic, irrespective of US-led sanctions. The NCRI further underlined the problem of corruption in a report on Monday which once again drew upon news sources linked to the Iranian government.

According to that report, sources in the Iranian judiciary have summoned and “basically convicted” former President Mahmoud Ahmadinejad over the alleged embezzlement of three billion dollars in government assets. Despite this, Ahmadinejad remains not only free from jail but also close to Supreme Leader Ali Khamenei, having been recently appointed as a member of the Expediency Discernment Council.

The NCRI report explicitly concludes that an impressive history of government corruption, together with political infighting and growing public discontent, constitutes proof that a “grim prospect” faces any Western governments or businesses that are looking to invest in the Islamic Republic or “collaborate with the Iranian regime”.

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