Teaching Comparative Government and Politics

Thursday, September 24, 2015

Seeking outside influence

Nigeria and Mexico are seeking foreign investments. China is investing — especially in Africa and Latin America. Iran has been largely walled off from foreign investment by sanctions and desires to avoid foreign influences.

As most sanctions seem to be on the verge of ending, are there investment opportunities? And who wants them? What does it all mean for government and politics in Iran?

Not so fast: Enthusiasm for post-sanctions Iran is being tempered by realism

ACROSS Europe, businessmen pack conference halls to discover how to unlock Iran’s vast potential after three decades of isolation… Not only would they enjoy access to Iran’s 80m people, but to a hub for trading with hundreds of millions more in Iran’s troubled neighbours…

Sanctions have indeed created pent-up demand, but they have also dried up the liquidity needed to finance it. The price-tags delegates place on Iran’s needs—$15 billion for its railways, $200 billion for its energy sector, $30 billion for tourism—look exciting, but paying for them is a different matter. Oil prices are down by half, sharply reducing revenues as well as the incentives to invest when reopening happens.

In the meantime nepotism, legal unpredictability and state companies masquerading as private ones will all bedevil business. “The corruption is still at unbelievable rates,” says Sharif Nezam-Mafi, [an organizer of a Zurich conference for potential investors]. Financial experts insist that President Hassan Rohani remains on track to privatise the inhisarat, or state monopolies, which dominate the economy, are blacklisted by sanctions and often have close ties to the Revolutionary Guards…

Not all is gloom… Mercedes and Volkswagen are said to be gearing up to replace Peugeot, which once ranked Iran as its second largest market.. Coca-Cola is planning a major expansion in 2016… Politicians and businessmen again speak excitedly of the Persian Gulf. But the reality is that the Iranian phoenix may take some time yet to become airborne.

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