Tehran still looking to reap benefits of nuclear deal
London - The nuclear agreement between Iran and US-led world powers — known as the Joint Comprehensive Plan of Action (JCPOA) — has survived the first of its ten years.
In terms of foreign direct investment (FDI), Iran jumped from 12th of 14 Middle East countries to third, according to fDi Markets, a Financial Times service. Boeing announced it received US government clearance for a deal with Tehran that Iranian officials put at $25 billion.
However, as the world braces for new instability emerging from Britain’s decision to leave the European Union, the Iran nuclear deal, signed July 14th, 2015, remains under attack in Iran, in the United States and in many Arab states. It is the United States where the greatest strain lies. Republican Party presidential hopeful Donald Trump has called the Iran deal a “humiliation”, sensing a boost for his anti-immigrant, anti- Muslim populism in the British referendum result.
Iranian Supreme Leader Ayatollah Ali Khamenei recently said the pros and cons of the JCPOA had been “exaggerated” with its “porousness and loopholes” exploited by the “enemy”.
He argued that while Iran had suspended uranium enrichment to 20% purity, closed the fortified Fordow nuclear site and the Arak heavy-water facility, the Americans had not fulfilled “major parts” of their commitments.
Khamenei insisted Iran would not be the first to abandon the agreement but he warned that “if the other side seeks to break it, as some candidates in the US presidential elections threaten to tear it to pieces, we will set it ablaze”.
Despite the Boeing deal and the FDI figures, continuing US sanctions are deterring companies and would-be investors. The nuclear agreement led in January to the lifting of UN sanctions and many US and EU sanctions.
Tehran’s oil exports are back nearly to 2012 levels but Washington continues in general to block US financial institutions from contact with the Islamic Republic, barring foreign banks’ access to dollars for trade with Iran.
The United States also sanctions around 200 Iranian entities and individuals for support of “terrorism” or for alleged infringement of human rights. Inevitably, foreign companies interested in Iran are anxious about unwittingly reaching deals with designated entities, especially the Islamic Revolutionary Guards Corps (IRGC), whose extensive holdings include shares in companies listed on the Tehran Stock Exchange.
As European firms — including Peugeot, Italian steel firm Danieli and Airbus — have signed multibillion-dollar agreements with Iran, European Finance ministers have sought clarification from Washington only to be told policy is clear: that companies should exercise due diligence and clarify ambiguities with Office of Foreign Assets Control (OFAC), the relevant section of the US Treasury.
The risks are large. Past US fines have included a record $9 billion slapped on BNP Paribas in 2014 in part for dealing with Iran. Among those ruling out early dealings with Iran are Switzerland’s UBS (fined $100 million in 2005 for supplying Tehran with new US banknotes), Credit Suisse Group (fined $536 million in 2009 for dealing with Iran), Germany’s Deutsche Bank, France’s Société Générale and Britain’s Standard Chartered.
The British Foreign Office estimated that EU-Iran trade could quadruple in two years from an annual $8 billion — calculations that may be revised after the Brexit vote. However, global law firm Clyde and Company suggests that more than half of international companies interested in Iran are holding back.
Iranian officials, such as Khamenei, have expressed disappointment over how the deal is panning out. According to US Secretary of State John Kerry, Iran has recouped just $3 billion of $100 billion in assets frozen internationally.
In Washington in April, Valiollah Seif, Iran’s Central Bank governor, said Tehran had received “almost nothing” in sanctions relief. Matters were not helped by April’s US Supreme Court decision to allow $2 billion of Iran’s frozen assets to be awarded to relatives of US servicemen killed in Lebanon in 1983 by militants allegedly linked to Iran.
The lack of progress strengthens critics of the agreement in Iran as fundamentalists look for a candidate to challenge Iranian President Hassan Rohani in the 2017 presidential election.
In a reflection of government concern, Iranian media recently announced a plan to allocate the equivalent of $4.6 billion to help small and medium-sized enterprises in the current Iranian year, which ends in March 2017.
Local-grown business is not enough. Attracting foreign investment is part of Rohani’s wider plan for economic reform.
The president wants, for example, to scale back the involvement of the IRGC and their companies. One test case is the $2.7 billion bullet-train project linking Tehran, Qom and Isfahan, signed with a Chinese company and an IRGC outfit in 2010 but which the government wants to open in part to Western firms, including Germany’s Siemens and Italy’s Gruppo Ferrovie dello Stato Italiane.
Continuing US sanctions make attracting such foreign involvement more difficult for Rohani.