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A potential international agreement between global powers and the theocratic establishment of Iran, which will trigger the lifting of sanctions against Tehran, may create the perception that it is safe to do business with the Iranian regime or begin investing in the Iranian market.
The temptation to invest in Iran may be high due to it being “the last, large, untapped emerging market in the world,” according to one investment firm. In addition, opportunities exist in almost every sector and the economy desperately needs new capital.
With the easing of sanctions, the country’s global legitimacy would improve and foreign businesses would be permitted to operate there. Iran would reenter the international community, the international banking and financial systems, and the open market for oil. This would be particularly beneficial as the Islamic Republic has the world’s second-largest natural gas reserves and the fourth-largest proven crude oil reserves, and the sale of these resources accounts for more than 80 percent of its export revenue.
But corporations and firms ought to resist the temptation to rush into investing in the Iranian market for several reasons. First of all, an international deal with the Iranian regime over its nuclear program is not set in stone and either party could pull out without providing reasons; this would trigger the reimposition of sanctions and jeopardize foreign investments.
One risk factor is that Tehran will covertly continue advancing its nuclear program and, if it is caught, the deal could fall apart. After all, the Iranian regime has a history of deceiving the International Atomic Energy Agency by conducting clandestine nuclear activities, as it did at Arak, Natanz and Fordow following the signing of the original Joint Comprehensive Plan of Action in 2015. One year into that agreement, two credible and timely intelligence reports revealed Iran had no intention of honoring it.
One report was by the Institute for Science and International Security, which revealed that Tehran had sought to purchase many tons of controlled carbon fiber, raising “concerns over whether Iran intends to abide by its JCPOA commitments.” And Germany’s domestic intelligence agency, the Federal Office for the Protection of the Constitution, revealed in its annual report in 2016 that the Iranian government pursued a “clandestine” path to obtain illicit nuclear technology and equipment from German companies “at what is, even by international standards, a quantitatively high level.” It added that “it is safe to expect that Iran will continue its intensive procurement activities in Germany using clandestine methods to achieve its objectives.”
Another risk factor comes from the key international player, the US. When then-President Barack Obama sealed the nuclear deal with Iran, it was believed that all future US presidents would stick to the agreement. But that was not the case, as Obama’s successor Donald Trump pulled the US out of the deal because he thought it was weak. As a result, even if Joe Biden strikes a deal while he is in the White House, there is no guarantee that the next US president will adhere to it and not reimpose sanctions on Iran.
Corporations and firms ought to resist the temptation to rush into investing in the Iranian market for several reasons
Dr. Majid Rafizadeh
In addition, since Iran’s economy is controlled by the state, with the Islamic Revolutionary Guard Corps and Supreme Leader Ali Khamenei enjoying a monopoly over the country’s industries, foreign business deals or investments will most likely primarily benefit them. This will empower them to more forcefully pursue their military adventurism and hegemonic ambitions in the region.
Furthermore, capital investment in a foreign country requires political stability. There is political stability in several countries in the Middle East, including Kuwait, Bahrain and Saudi Arabia, but this is not the case for Iran. Domestically speaking, Iran is always on the verge of a nationwide uprising. Even if the regime has succeeded in suppressing previous large-scale protests, the deep anger felt by millions of Iranians continues to simmer under the surface. Any flashpoint could again push their frustration and anger over the edge, and nationwide protests could ultimately endanger the ruling mullahs’ hold on power.
The people’s economic suffering is not the only reason behind the recurrent protests. Other reasons include general disaffection with the political establishment when it comes to its widespread corruption, human rights abuses, suppression of the freedoms of speech, press and assembly, and lack of rule of law and justice. This is evident in people’s chants against Khamenei and his government, such as “Islamic revolution was our mistake” and “Down with the Islamic Republic.”
Businesses that want to invest in Iran ought to be cognizant of the fact these protests will not totally disappear. They can resurface at any time and have the potential to quickly turn into widespread demonstrations, making it impossible for the IRGC to subdue them, no matter how powerful the regime’s forces are.
Even with a return to the nuclear deal, investing in Iran and doing business with the Tehran regime is dangerous due to the country’s sociopolitical instability and the inherent risk that the deal may fall apart, once again triggering the reimposition of sanctions against the Islamic Republic.
* Dr. Majid Rafizadeh is a Harvard-educated Iranian-American political scientist. Twitter: @Dr_Rafizadeh