In the Countdown to Save the Iran Deal, A Need for Business Diplomacy

 

 

Esfandyar Batmanghelidj is the founder and publisher of Bourse & Bazaar, a media company which supports Iran "business diplomacy" through events, publishing, and research. Bourse & Bazaar is the organizer of the

Europe-Iran Forum, the leading Iran business summit, which has been held in London (2014), Geneva (2015), and Zurich (2016, 2017).

 

Less than 100 days remain for the United States and its “E3” partners of Germany, France, and the United Kingdom to “fix” the Joint Comprehensive Plan of Action (JCPOA) in an effort to keep the Trump administration committed to the deal. This countdown, triggered by President Trump’s ultimatum to address what he considers “disastrous flaws,” has cast a shadow on the pace of post-sanctions trade and investment in Iran, and has intensified already hostile rhetoric towards the nuclear deal.

 

The consequences of Iran’s slow economic recovery are serious. Public support for the nuclear deal is falling, and grievances over unemployment and wage stagnation led to widespread protests in January. The economic boon of the nuclear deal has been a pillar of its political justification in Iran, and a major incentive for the broad European commitment to the deal. To the extent that economic benefits have yet to fully-materialize in Iran, the risk to the deal is being compounded.

 

A recent survey developed in collaboration between Bourse & Bazaar and the International Crisis Group, including over sixty senior executives from some of the world’s largest multinational companies active in Iran, sheds light on this atmosphere of uncertainty. The results and Bourse & Bazaar’s related report clearly demonstrate that the risk of sanctions “snapback” and rising political tension, largely amplified by the rhetoric of the Trump administration, have caused material delays in the Iran investment plans of some of the world’s largest companies.

 

Executives clearly believe that there has been a slowdown in Iran business. When asked to evaluate the pace of trade and investment in Iran, 83 percent of senior managers at multinational companies indicate that companies “are moving slower than they could” to engage in the Iranian market. Moreover, 51 percent of executives report that their company’s investment plans were adversely affected by Trump’s October de-certification. The fear of snapback looms large given the reluctance with which waivers are being issued and the tone of today's statements will likely exacerbate these concerns.

 

American policymakers have often deflected blame for the slowdown by pointing to Iran’s complex business environment, which presents risks of corruption and mismanagement to international companies and investors. However, executives are clear that the current slowdown is primarily attributable to external factors, not internal challenges. When asked what is the “primary obstacle facing your market rollout in Iran,” 32 percent of survey respondents indicate sanctions compliance, while 20 percent point to “managing political and

reputational risk.” By comparison, 21 percent point to “access to financing.” These are all external barriers. Domestic commercial and operational issues such as finding a local partner or structuring a local entity are far less frequently identified as major barriers, or as priorities for redress. This makes sense. Multinational companies have extensive experience working in difficult markets worldwide, and many of the companies currently seeking to ramp-up in Iran boast decades of experience in the Iranian market. Most domestic risks have proven manageable.

 

This depth of experience may also help explain the stubborn confidence exhibited by many executives. Despite all the frustrations, the business community remains a source of optimism and valuable pragmatism on Iran. A majority of executives (63 percent) believe that the nuclear deal is likely to survive even if the United States pulls out. A staggering 91 percent of executives still believe their company can be commercially successful in Iran. Policymakers, particularly in Europe, need to engage business leaders and support solutions to increase

trade and investment. By doing so they can draw upon this increasingly rare confidence to help protect the nuclear deal.

 

Against this backdrop of stubborn confidence and rising uncertainty, the nuclear deal is sliding into “zombie state.” Neither totally dead, nor totally alive, the deal exists in an ambiguous position that stymies most commercial actors. European policymakers have less than 100 days to resuscitate the deal and economic relations with Iran must be at the top of the agenda. Given the dynamics at play, it would behoove policymakers to embrace “business diplomacy” and spearhead a technical, programmatic dialogue on the obstacles preventing the desired rebound of trade and investment in Iran. If this can be achieved, those who wish to see the deal preserved will be better able to demonstrate that the deal remains worth the political capital spent to date.

 

 

For further information please contact:

Tracey Stewart

Business Development Manager

tracey.stewart@ambassadorllp.com

 

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