Iran Trying to Court Western Investment but Keep Influence at Bay

The Trend article focused on Iran’s needs regarding electrical power, and it found that the country will need at least 15 billion dollars just for development of power plants, and another five billion for necessary improvements to transmission and distribution. The lack of investment in the energy sector of the past several years has caused Iran to shift from exporting eight billion kilowatt hours of electricity per year to barely being able to meet its own energy needs. The 20 billion dollar investment price tag is essentially the minimum that the country will need over the short term to be able to meet its required five percent annual output growth.

And these figures are only for the power generation industry. They say nothing about the all-important Iranian oil economy. Naturally, this has also been severely held back by economic sanctions and is in similarly dire need of foreign investment. But in the six months since the implementation of the nuclear deal this investment has been slow in coming, both because of the persistent effects of ongoing non-nuclear sanctions and because Iran is dragging its feet over issues that could help to attract even greater investor interest.

This situation can be assumed to reflect upon Iran’s investment prospects across the board, not just as regards the oil industry. And it is increasingly clear that Iran faces potential problems for all of its sanctions-damaged industries, in the sense that Iranian authorities have conflicting desires and are standing in the way of their own economic interests in some respects.

Of issue is the apparent fact that foreign investment, while a potential boon for the overall value and sustainability of the Iranian economy, also represents a challenge to the dominance of that economy by hardline entities such as the Iranian Revolutionary Guard Corps. With this in mind, there has been considerable discord within Iranian political circles regarding the structure of yet-unreleased foreign investment contracts, and whether they will reverse former rules that prevented foreign entities from owning Iranian assets.

An article published by UPI on Monday seems to give the impression that the Iranian regime is approaching a compromise whereby foreign investors will be given increased access to the Iranian economy, but only if explicitly approved by the regime. The report indicates that the National Iranian Oil Company has generated a list of foreign investors from which bids will be accepted in the coming months, and that that list has been limited to about 35 items.

Leaving aside the fact that US law still prevents direct contact between the Iranian and American financial systems, it is probable that hardline authorities in Iran would not allow American investors to appear on such a list in the future. Indeed, Supreme Leader Ali Khamenei has already ordered that various American imports be banned from the country.

On the other hand, the American company Boeing has actually been eagerly embraced by the Iranian airline industry, although it remains to be seen whether the deal between Boeing and Iran Air will ultimately be approved by authorities on both sides. It also remains to be seen what the final form of that deal will be. Initially, Iran expressed interest in buying or leasing 109 Boeing aircraft, but recent reports indicate that it is cooling on the idea of taking the largest of the jets on offer from both Boeing and its competitor Airbus. Iran Air may in fact replace these with other, smaller craft.

Interestingly, Reuters reports that this alteration specifically involves avoiding the aircraft capable of long international flights like those that would have destinations in Europe and the US. In this sense, the change may reflect hardline intervention aimed at limiting the prospects for cultural and economic conflict between Iran and the West. If so, this is a further indication of the conflicting desires of Iranian authorities. Reuters notes that even as Iran is considering changing its aircraft purchase deals, it is also showing interest in obtaining dozens of additional aircraft from these same foreign manufacturers.