Relief from US and EU economic sanctions related to the Iranian nuclear program could lead to Iran quadrupling its current levels of trade with the EU alone. That figure currently stands at about eight billion dollars, but Iran’s wealth acquisition from EU institutions could be significantly greater than that even over the short term, since the Islamic Republic is still expected to gain access to something like 30 billion dollars’ worth of assets that were previously frozen in Western banks.
The long-term increase in trade between Iran and Europe may seem to be virtually guaranteed by the large-scale interest that European governments and businesses have expressed regarding the potential post-sanctions return to the Iranian market. This has been signified, for instance, by a wide range of visits to and from Tehran by trade delegations and government officials. EU nations including France, Italy, and Germany were quick to arrange such interchanges almost immediately after negotiations concluded between Iran and the P5+1 last summer.
However, at the same time that many media outlets have emphasized the significance of this Western desire for Iranian trade, others have been keen to point out that that interest does not necessarily translate to genuine willingness to pursue investments and formal trade agreements. That is to say that although various Western firms including European aircraft and automobile manufacturers have already inked deals with the Islamic Republic, others have been extremely wary about such agreements, for fear that Iranian trade may still open them up to penalties under lingering or potentially re-instituted US sanctions.
This complicating factor was emphasized once again on Wednesday by Bloomberg, which reported that recent survey data showed 58 out of 100 executives in UK-based international firms were not adequately confident in their ability to negotiate the Iranian market without violating existing restrictions. Furthermore, most of these executives recognized that their businesses were very likely to lose significant income if the nuclear agreement happened to fail, leading to the re-imposition of former economic sanctions.
Although this account of the Joint Comprehensive Plan of Action has been disputed by some critics, its provisions technically allow for those former sanctions to “snap back” into place if at any point Iran is found to be in violation of its obligations for restricted nuclear enrichment and nuclear stockpiling.
At the same time that the administration of US President Barack Obama has been trying to encourage confidence in these snapback provisions, it has also been making considerable efforts to safeguard the success of the nuclear deal. And as Bloomberg emphasized, this has involved the State Department providing what it referred to as a “huge amount of information” to American and European businesses regarding the existing restrictions on doing business with Iran.
In providing this information, the administration has also opened itself up to criticism that it is actively encouraging Western businesses to help enrich the Islamic Republic. Furthermore, this criticism has been underscored by accusations that the US might even lift some of the existing restrictions, as by giving Iran access to the US financial system.
However, until such time as that access is granted, it remains the case that at least some portion of the current restrictions are related to Iran’s own failure to act in accordance with universal requirements for access to international banking transactions. According to Bloomberg, the International Monetary Fund recently issued a statement emphasizing that Iran’s apparent lack of effort in this regard was also of concern to Western executives and investors who are otherwise concerned about the effects of non-nuclear sanctions.
Also on Wednesday, Economy Watch reported that the IMF’s statements had gone on to warn that Iran cannot hope to achieve the sort of economic recovery that it envisions by focusing solely on its oil economy, for which Iran is seeking tens of billions of dollars in foreign investment.
The IMF therefore advised Iran to focus on “building a competitive and flexible domestic economy that will serve as a suitably strong platform for growth,” and also to do the difficult work that is required for reentering the global economy. This would require, among other things, mitigating widespread concerns about rampant money laundering in the Iranian financial system.
But doing so may be particularly difficult since much of that money laundering concern is related to the domination of the Iranian economy by the powerful Iranian Revolutionary Guard Corps, which has controlling interest in virtually all leading Iranian companies, as well as being a driving force in Iran’s sponsorship of terrorist groups and foreign Shiite militias.