Iran’s long isolation from the global financial system, continuing sanctions and its own practices, such as arresting foreign businessmen as suspected spies, are hampering its ability to benefit more from a groundbreaking nuclear deal, according to current and former U.S. officials and Iran scholars.
Although the number of business deals has slowly increased since nuclear-related sanctions were lifted in January, large banks in Europe and Asia have balked at financing major projects in Iran.
The reasons for Iran’s financial and investment problems are multifaceted, but Washington and Tehran blame each other.
The Obama administration argues that the real issues are Iran’s poor business environment and policies that undermine investor confidence — including ballistic missile tests, arms shipments to rebels in Yemen and the imprisonment of businessmen accused of espionage.
Iranian officials complain that the United States has warned bankers away from deals that could run afoul of U.S. sanctions that still target the country.
The United States says that those sanctions were imposed because of Iran’s continuing human rights violations and ties to terrorist groups, and that they do not prohibit non-U.S. companies from moving into Iran.
Secretary of State John F. Kerry is expected to meet with members of the British Bankers’ Association in London on Thursday to clarify what is now permissible. On Tuesday, he told reporters that banks in Europe can open accounts for Iran, fund projects and lend money.
“If they don’t want to do business or they don’t see a good business deal, they shouldn’t say, ‘Oh, we can’t do it because of the United States,’ ” Kerry said, declaring that the Islamic republic is “open for business.”
“We sometimes get used as an excuse in this process,” Kerry added, saying that by clarifying what is now permitted, the United States is fulfilling its obligations under the nuclear deal.
The U.S. sanctions for human rights abuses and terrorism are complicating matters, U.S. officials acknowledge. For example, any foreign bank financing a project in Iran would have to prove that no Americans were involved in any part of the transaction. But U.S. officials say the banks are being overly cautious.
The United States, Kerry said last month, “is not standing in the way, and will not stand in the way, of business that is permitted in Iran since the [nuclear deal] took effect.”
And U.S. officials said Iran needs to look to its own practices. The country routinely scores low on a number of indexes ranking countries’ business climates, including those by the World Bank, the International Monetary Fund and Transparency International.
“The most pressing concern about doing business in Iran does not have to do with sanctions but with really grave and long-standing concerns about the risks of doing business there,” said Elizabeth Rosenberg, a fellow with the Center for a New American Security. “Inadequate transparency, potential money laundering and garden-variety corruption have nothing to do with nuclear proliferation.”
One key institution effectively blacklisting Iran is the Financial Action Task Force, an international body that monitors compliance with rules on money laundering and financing terrorism. In February, it advised its members “to give special attention to business relationships and transactions with Iran.” Only North Korea has received similar treatment.
A major concern is the Revolutionary Guard Corps’ domination of Iran’s economy, especially banking, construction, energy and telecommunications. The paramilitary force commands the nation’s missile program and funnels money and arms to Houthi rebels in Yemen and Hezbollah in Lebanon, considered a terrorist group.
“Any company wanting to do business in Iran will have to do due diligence and find out if the Guards are involved,” said Alireza Nader, an analyst with the Rand Corp. “It’s not impossible, but it’s very difficult.”
The Revolutionary Guard Corps, which opposed the nuclear deal, is the arm of state that has arrested numerous dual nationals on espionage charges, particularly those from the three Western countries that negotiated the deal.
Four British citizens, for instance, are being held.
Kamal Foroughi, 76, a British Iranian who worked in Iran for a foreign oil company, is serving an eight-year sentence — seven years for espionage and one for having alcohol at home.
“If I were an investor, I’d be quite nervous about these sorts of cases,” said his son, Kamran, who works in London’s financial industry. “I’d welcome ties with Iran; it’s good for business. But investors should beware before sending a staff member to Iran.”
Even after five Americans were released in a January prisoner swap, at least two U.S. citizens remain under arrest.
Siamak Namazi, who spent years arranging foreign investments in Iran, was arrested in October while visiting relatives. When his father, Baquer, came to visit him in February, he was arrested as well. They have never been charged, although the Iranian news media has called them part of an American plot to infiltrate Iranian society.
Hadi Ghaemi, head of the International Campaign for Human Rights in Iran, said the Namazi case has discouraged many Iranian American business people from traveling to Iran.
“Their detention sends a signal to Iranian Americans who have been very eager to expand business relations after the lifting of sanctions to stay away,” he said. “They are the future of the country, in money and expertise. But the Revolutionary Guards worry they will lose their grip on the economic monopoly they hold.”
Trita Parsi, head of the National Iranian American Council and a friend of Siamak Namazi, said he doesn’t think the detentions are deterring foreign business investment: “That’s not one of the things keeping Barclays [bank] up at night.”
Parsi said uncertainty about the U.S. presidential election and concern that an incoming administration could reimpose nuclear sanctions are bigger brakes. International banks have been fined billions of dollars by the United States for breaching sanctions.
“They want guarantees they won’t be caught up in a continuation of the nuclear issue in which fines will be inflicted on them,” he said. “If the deal is weak and fragile by the time there’s a different president, the calculation of the banks is not necessarily incorrect.”