The template for foreign investment had been a controversial issue among the Iranian establishment since the conclusion of nuclear negotiations between Iran and the five permanent members of the UN Security Council plus Germany. Older models had prevented foreign companies or individuals from holding equity stakes in Iranian firms, and had otherwise limited the extent to which foreign entities could profit off of Iranian assets.
Hardline organizations like the Iranian Revolutionary Guard Corps had been keen to retain these restrictions, both for the sake of preserving an image of anti-Western defiance and out of fear of partially losing their own hold on the Iranian economy. Opponents of the Iranian regime, such as the National Council of Resistance of Iran, have estimated that the IRGC controls the vast majority of the Iranian GDP, either directly or through a series of minority holdings and affiliates in the Iranian business sector.
On the other hand, more pragmatic Iranian officials including President Hassan Rouhani have been defending the prospect of revising the pre-nuclear agreement contract model, in the interest of attracting much needed foreign investment, to buttress the fledgling Iranian economy. This pragmatic point of view has largely prevailed, as Reuters now reports that the old buy-back system is coming to an end. However, the new contract model is certainly being restrained in its application, considering that it is currently limited to the list of 29 pre-approved companies.
But the restrictions are not only evident on the Iranian side; Western opposition also appears to be helping to limit the prospects for foreign investment. The list of companies was originally expected to include UK-based BP, but the petroleum giant opted out of further investment talks, citing fears of a changing geo-political situation as the world waits for US President-elect Donald Trump to assume power. Trump has struck a noticeably hardline on Iran, especially compared to outgoing President Barack Obama, whom critics including the NCRI have accused of “appeasement” for the sake of a legacy-defining nuclear deal.
Those accusations stem partly from the agreement itself, which allowed Iran to retain some of its nuclear enrichment capabilities, in contrast to the expectations of some Western figures who had been pushing for the complete halt of the Iranian nuclear program. Also of concern is the arguably anemic response to continued Iranian provocations in the wake of the nuclear agreement. The IRGC has overseen the testing of several ballistic missiles since nuclear talks concluded, and has also made aggressive maneuvers and verbal threats toward US Navy vessels and aircraft.
Critics of the outgoing US president’s policies tend to view these gestures as being particularly scandalous in light of the large-scale relief from economic sanctions that the world has granted to Iran under the nuclear deal. This relief was quantified and discussed on Friday in a report by the Wall Street Journal, which emphasized that roughly 10 billion dollars in unfrozen assets have been delivered to Iran in highly liquid forms of capital, as foreign currency or gold bullion. This has only intensified concerns that the persistently belligerent IRGC and its handlers in Tehran would channel much of this difficult-to-trace capital into the hands of terrorist groups like those operating in Syria and Yemen under IRGC command.
Those terrorist entities, including Lebanon’s Hezbollah and various other Shiite paramilitaries, are apparently owed a substantial amount of the credit for the recent victory of pro-Assad forces in a major offensive against the former Syrian rebel stronghold of Aleppo. Iran has clearly sought to derive a great deal of propaganda value from this victory, possibly even using it to compensate for perceived damage to Iran’s reputation as a bulwark against Western interests in the region.
Last week, EA WorldView reported that IRGC Brigadier General Hossein Salami had declared that the conquest of Aleppo forestalled Western plans aimed at destabilizing that country and then moving into Iraq and ultimately taking aim at the Iranian regime. Such statements seem to suggest that Iran is confronting the West militarily even as it cooperates with it in the economic sphere. But the US and its close allies have taken remarkably little action in Syria, apart from limited logistical support for pro-democratic rebel groups like the Free Syrian Army.
But Salami’s statements are not even among the boldest claims of military courage by the Islamic Republic. On Wednesday, the Associated Press reported that Iranian General Abbas Farajpour had claimed that the country’s military successfully warned off “12 aircraft of trans-regional countries” during three days of drills. Iranian state media added the assertion that some of these aircraft belonged to the United States.
Farajpour’s vague statements, however, were surely meant to imply a tense military situation with other adversaries, as well. Chief among the likely targets of Iranian accusations and belligerence is the Kingdom of Saudi Arabia. The Saudis severed diplomatic ties with Iran last year following a mob attack on the Saudi embassy in Tehran, which took place against the backdrop of sectarian conflict between the two countries. Iranian interventions in Yemen are in many respects a proxy war between Iran and Saudi Arabia, and the Saudis also tacitly support anti-Assad factions in Syria.
This being the case, developments in those conflicts threaten to solidify the dividing lines between two spheres of influence, and this is something that Iranian officials appear to be keenly aware of. On Monday, Al Arabiya News reported that Ali Akbar Velayati, a leading advisor to Iranian Supreme Leader Ali Khamenei, had once again lauded the conquest of Aleppo as a “victory of victories,” and had added that he hoped it would lead to a situation in which Syrians viewed Iran as a second home. Meanwhile, many analysts have warned that Iran’s imperialist activities in Syria and Iraq threaten to soften the boundaries among those countries and leave the Assad regime consistently dependent on Tehran and its militant proxies.
However, there are still various entities that could constrain or prevent this outcome. In the immediate aftermath of Aleppo, the major players in the future of Syria appear to be Iran, Russia, and Turkey. According to World Bulletin, these are the only three countries that are expected to be at talks in the Kazakh capital of Astana later this month, ostensibly to build on the progress that began with a ceasefire established jointly by Russia and Turkey.
Whereas Russia and Iran are both backing the Assad regime and have even been credited with saving it from an early defeat by the rebels, Turkey has contrary interests and has even gone so far as to insist that foreign forces withdraw as part of a political solution. Not only has Iran refused this condition, it has also acted in opposition to Russia’s efforts to establish and enforce ceasefires after key points in the conflict. This was evident in the aftermath of Aleppo, at which point civilians evacuating the area for rebel held areas to the West were stopped at an Iranian checkpoint despite having received assurances of safe passage after passing a Russian one.
This serves to reinforce the notion that Russian and Iranian interests could be made to work against each other in Syria. But for this to happen, other foreign powers would presumably have to work to restrain or counterbalance Iran’s role in this and other regional conflicts. The incoming Trump administration is certainly one power that could play this role, but so too are Iran’s regional adversaries and even some of its regional partners.
It remains to be seen whether other powers in the Middle East will be able to counterbalance the united front that Iran is trying to establish with the subjects of its influence, including the Assad regime. But as the Gulf Arab states continue to respond to the perception of Iranian overreach, an effective counterbalance seems increasingly likely. This made more evident by the fact that some aspects of that response chip away at Iran’s existing influence.
Bloomberg reported on Monday that Saudi Arabia’s neighbor Oman had expressed willingness to join the Saudi-led alliance that is fighting against Iran-backed militants in Yemen. This is a clear deviation from Oman’s friendly relations with Iran, which had prevented the Arab nation from joining many of its neighbors and partners in following suit when the Saudis severed diplomatic relations with Iran.
The apparent change in Omani policy is indicative of the danger that the Iran regime faces if it is seen as being needlessly or excessively aggressive in the region. It is perhaps for this reason that Iran has sought to portray itself as open to reconciliation with Saudi Arabia, while also portraying the Saudis as belligerent. In the latest example of this, Agence-France Presse reported that Iran had flatly denied Saudi claims about having invited Iran to talks aimed at resolving differences over the management of the hajj pilgrimage.
Such instances of reputation management put Tehran in the difficult position of having to appear reasonable in its own geopolitical neighborhood while openly intervening in foreign conflicts, undermining ceasefire agreements, and actively seeking to provoke powerful foreign players like the United States. Similar difficulties are evident in the country’s economic policies, wherein the Iranians are having an increasingly difficult time of attracting foreign investment while both withholding contracts from various companies and giving the US reasons to warn off potential investors.