Iran Seeks Expanded Economic Relations on its own Terms

Iranian Oil Minister Bijan Zanganeh said that the template for the text of the new contracts would be finalized in the next few weeks and would be presented to prospective European business partners in a London oil conference scheduled for December. This should give entities on both sides at least a few months to discuss forthcoming possibilities before the implementation of the Joint Comprehensive Plan of Action and the resulting removal of economic sanctions, which British Foreign Minister Phillip Hammond expects to take place in early spring.

Last week, Zanganeh boasted that Iran would be able to add 500,000 barrels per day of oil output “in the first days after sanctions are lifted.” This would allow Iran to nearly or fully reclaim the market share that it lost under the sanctions regime. While the oil minister’s optimistic assessment exceeds the projections of most analysts, Iran is expected to experience a major boon, helped along by the strength of interest in rapid investment in the country among Western entities.

But there are still complicating factors in the expansion of trade relations between Iran and the West, and they exist on both sides of this divide. In the first place, some businesses that are headquartered in Europe have expressed concern that they may be opening themselves up to sanctions enforcement if they are too quick to do business in or even begin talks with Iran.

Anxiety on this point stands to be amplified by the continuation of a strong trend of congressional and popular opposition to implementation of the Iran nuclear deal. This opposition raises the possibility that additional measures will be taken to put pressure on the Iranian economy in the future, either under a different presidency or in the event that Iran comes under suspicion of cheating on the agreement.

But some businesses have also said that they are monitoring the situation in the Iranian market in order to see what conditions the Iranian government imposes on doing business in the country, and how this might harm investors’ prospects. This was partly answered on Monday when, according to the Jerusalem Post, Iranian President Hassan Rouhani declared that his government would resist investors who did not commit to working with domestic partners, hiring domestic workers, and generally sharing a portion of their earnings with Iranian entities.

Such restrictions may change the calculus for some of the businesses that had previously expressed interest in early adoption of the Iranian market. And they will surely justify the caution of those who had held back.

What’s more, it remains to be seen how equitably the Iranian regime will impose and enforce these sorts of restrictions. Supreme Leader Ali Khamenei recently declared that the Islamic Republic would take measures to resist Western cultural, political, and economic influence in the wake of the nuclear agreement. Selective restrictions on investment could serve this end while giving Tehran cover to deny that it is playing favorites.

But if it does so, this further demonstrates the danger of a de-sanctioned Iranian regime establishing stronger partnerships with other Asian countries, in opposition to Western interests. Of course, there is ample evidence of reciprocal interest in both economic and military cooperation between Iran on the one hand and Russia, China, and various smaller partners on the other hand.

Aviation Pros reported on Monday that alongside the German-based Lufthansa, several Chinese firms also expressed interest in working closely with Iran, as they visited its booth at a Russian aerospace exhibition.

Germany was the first Western nation to send a trade delegation to Iran in the wake of the signing of the nuclear accord on July 14. But it remains to be seen whether Iran reciprocates this apparent eagerness for new investment.

But aerospace collaboration has potential consequences for both the Iranian economy and the Iranian military, and there have been clear moves toward collaboration with China on the latter front, including the execution of joint maneuvers and the provision of China with unprecedented naval access to the Persian Gulf.

Similarly, Russia and Iran have had a number of official talks about mutual defense, as well as trade. Last week it was reported that Russia had expressed interest in purchasing drone technology from Iran, which had just claimed the capture of a drone from an unnamed foreign country. These preliminary discussions come at the same time that Russia is working to finalize the delivery of an advance S-300 missile system to Iran, after previous delays during times of diplomatic and economic pressure by the world community.

But while Western countries pursue major investments in Iran, and while Iran and its emerging partners enjoy bilateral discussions, some of Iran’s traditional regional adversaries are pushing to counteract the growth of Iranian economic and political power.

On Monday, Middle East Confidential pointed out that Hamad al-Harishani, the head of the Kuwaiti parliament’s foreign relations committee, declared that “Iran is an enemy plotting to swallow up [Persian Gulf] states and resources and is the true enemy of the region.”

The remarks stemmed in part from new evidence that Iran is infringing upon disputed territory with its plans for foreign investment and oil industry development. But they also relate to the continuation of Iran-backed terrorism in the region, including in Bahrain where a recent bombing and an even more recent bomb plot were both linked to Iran.

Kuwait itself raided a terrorist cell in August which was found to be linked to Hezbollah and in possession of large cache of weapons and explosives, some of them originating in Iran.