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With Nuclear Deal’s Implementation Still Pending, Foreign Entities Rush to Invest in Iran

In Iran, the deal has been given approval by Supreme Leader Ali Khamenei, so it is all but certain to be accepted on that side. But there is much more serious discord in the US, where congressmen from both parties are working to establish a veto-proof majority for rejection of the deal while President Barack Obama is campaigning for Democratic loyalty and popular support of the agreement.

The resulting uncertainty about the ultimate fate of the bill provides incentive for some Western businesses and governments to remain cautious for now about developing a foothold in the Islamic Republic before it becomes enriched and no longer subject to restrictions on foreign transactions. But as Reuters made clear in a report on Monday, the actual amount of caution varies dramatically among investors.

The report emphasizes that some foreign entities are rushing to invest in the new market. In addition to the promise of profits from the Iranian energy sector, there is great potential for multinational companies to profit from consumer exports to Iran. In the coming months this is especially true of the mobile phone, automobile, and hospitality industries.

Another Reuters report indicates notes that the French car manufacturer Renault is already looking into selling a low-price, Indian-made vehicle to the Iranian market within the next month of two. Foreign cars were already reaching the Iranian market under the sanctions regime, mostly on the black market, but these tended to be high-price vehicles for the Iranian power elite. The new plan reflects the anticipation of broad-based, legitimate investment in the Iranian market.

Whereas the above two reports detail only the emerging interest among private entities and corporate investors, a separate one, also by Reuters, highlights the fact that in some instances this trend appears to be supported by changes in government policy following the conclusion of the nuclear negotiations.

That report points out that Germany has become the first Western nation to organize a high-level official’s visit to Tehran since the end of the negotiations. On Monday, German Economy Minister Sigmar Gabriel visited with his Iranian counterpart in an apparent first step toward resuming trade relations that previously gave Germany decades-long status as Iran’s largest European trading partner.

Because of that past history, Germany has reportedly been eager for the opening of the Iranian market throughout the course of the negotiations, and now that a deal has been secured the German government is actively supporting German businesses’ pursuits of investments in Iran.

Even at times when the final agreement were still far off, reports periodically emerged indicating that Western businesses and governments were both considering changes in policy that would allow them to gain an early foothold in the Iranian market, ahead of the flood of interest that was sure to follow the implementation of a deal. Fearing that the US was positioning itself to uniquely benefit from the new arrangement, the French parliament even considered the prospect of establishing a bank that was isolated from US exchanges and thus capable of circumventing sanctions.

Governments may still see value in this sort of an arrangement, depending on the outcome of the congressional review and the course of action that the United Nations might take in the event that the US Congress elects to retain American sanctions on Iran. The New York Times points out that Monday’s Security Council approval is a source of tension for the US and the UN, as it was initially hoped that the Security Council would delay a vote on the nuclear deal until after Congress had passed its judgment.

The possibility of contradictory votes from the two bodies raises the possibility of similarly contradictory policies with regard to sanctions relief, even though such a possibility has not yet been raised publicly or negotiated among the parties involved.

Critics of the nuclear negotiations have long warned that the appearance of US-Iran rapprochement might lead to hasty investor interest among Western countries and thus weaken global support for economic sanctions. Many of the same critics insisted that these same trends would make unrealistic the promised provisions for “snap-back” of economic sanctions in the event of Iran’s cheating on a final agreement.

These warnings are sure to only intensify in light of the latest signs of intense investor interest and possible pro-Iranian shifts in the foreign economic policies of some Western democracies. For critics of the negotiations, this trend seriously undermines the Obama administration’s optimistic narrative about what the nuclear agreement entails.

On Monday, Breitbart published its own response to that narrative, highlighting five key criteria that the deal fails to live up to. Two of these involve supposed restraints on sanctions relief and the consequences of Iranian non-compliance. The emerging foreign investment may serve to speed up sanctions relief that has not been explicitly tethered to Iran’s demonstrated compliance, and it may further undermine “snap-back” especially in light of the fact that the re-imposition of sanctions has to be approved by an international committee.


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