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Japan Mimics European Rush to Invest in Iran

Iran News Update has also regularly reported on the increasingly close relationships among Iran, Russia, and China, as well as upon Iran’s post-nuclear-deal efforts to push for joint development projects with nearby Asian countries. However, overall the role and status of the US’s Asian trading partners in this situation has been given comparatively little focus.

However, on Friday the Japan Times reported on some of the recent moves and future plans by the Japanese government for the pursuit of investment opportunities in the soon-to-be de-sanctioned Islamic Republic. These plans include the conclusion of a bilateral investment treaty in the first half of the coming week, plus a visit to Tehran by Japanese Foreign Minister Fumio Kishida in early October.

Such reports indicate that major Asian economies other than Russia and China are following the same patterns as Europe. Some European firms such as BP have elected to be cautious in pursuing new agreements, for fear that the US government may still block full implementation of the nuclear deal or that Tehran might make the investment environment unaccommodating to pro-American governments and organizations.

The former concern remains alive even though President Obama has now secured enough votes in the US Senate to sustain his veto of a resolution of disapproval. Republicans and some Democrats who are staunchly opposed to the nuclear deal may still take additional measures to impose the threat of new sanctions on Iran, with the possible effect of encouraging the Iranian parliament to overturn the deal on its own end.

Meanwhile, recent comments by President Hassan Rouhani about the need for foreign investors to “share the wealth” with Iran may highlight the possibility of Tehran placing restrictions on business relations, so as to limit the value of new investments for its traditional Western enemies.

But regardless of these factors, it now seems that most European and Asian business interests are taking it for granted that major economic sanctions will be removed, that Iran will have access to tens of billions of dollars in new revenue within the next several months, and that no one will be subject to serious penalties for openly doing business with the Islamic Republic.

Japan Times seems to indicate that it is not only Japan’s behavior but also its motivations that are in line with those of major European powers. Yoshihide Suga, Japan’s chief cabinet secretary said in a news conference, “We would like to take appropriate measures so as not to lag behind other countries.” The government’s plan is thus to keep in step with the US and Europe in terms of the pace of sanctions lifting.

This suggests that notwithstanding the foreign push for new Iranian investments, the US is still effectively in charge of what happens, and that foreign entities could still scale back their plans if Congress succeeds in limiting or cancelling the economic impact of the nuclear deal.

There is a good deal of precedent for this elsewhere. For instance, even at a time when few policy analysts expected the nuclear negotiations to end without a final agreement, India deliberately scaled back its imports of Iranian oil – at one point even to zero – in order to remain within the limits set by US sanctions.

India is expected to dramatically increase these imports once the sanctions are actually removed. But in the meantime Reuters reports that August marked a five-month low as India keeps Iran as its seventh-largest oil supplier, down from second largest in 2007, before sanctions began to take a serious toll.


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