In Iran, dividends of nuclear deal are slow to appear

In Iraq, Iran is aligned with the U.S. in the fight against the jihadis of Islamic State. But in Syria it is on the opposite side along with Russia, propping up the government of President Bashar al-Assad, while in Yemen Tehran has backed the Shi’ite Houthi insurgency that last year prompted U.S. ally Saudi Arabia to launch an air war across its southern border.

Few expect the U.S. to loosen sanctions on the IRGC and its business empire against this backd-rop.

FEAR AMONG BANKS

While Western businessmen commonly assume that their Chinese or Russian counterparts would be less inhibited by US sanctions, one Chinese executive in Tehran, who asked not to be named, also highlights the issue that international banks, fearful of being locked out of US capital markets, are so far spurning Iran.

Representing an oil and gas machinery company, he has visited Iran several times after the nuclear accord, but has yet to sign a single deal. Most Iranian companies, he says, even when there is clear demand for his drilling equipment, “don’t have money to pay”.

“They ask the sellers to provide financing,” he says “but that is impossible because throughout the world no foreign bank dares to do business with Iranian banks because they are scared…until the big (international) banks start doing business, but European banks are still scared of U.S. banks.”

Iranian leaders are complaining they have been short-changed on the sanctions relief part of the nuclear deal.

"On paper the United States allows foreign banks to deal with Iran, but in practice they cre-ate Iranophobia so no one does business with Iran,” Ayatollah Khamenei said last month.

Begle, the Swiss executive, says President Hassan Rouhani earlier this year asked the visiting Swiss president to press leading Swiss banks to start financing foreign operations in Iran.

"But of course the Swiss government cannot tell a private company to do this," Begle says. "It can indicate that it would see it favorably, it can even consider some guarantees, but after all, it is a decision for the bank itself."

HOSTILITY

There are other obstacles. The IRGC and other vested interests built up by hardliners grouped around Ayatollah Ali Khamenei, the Supreme Leader, are hostile to foreign entry into Iran’s economy.

Khamenei, whose power far outweighs that of Iran’s elected officials in parliament or the presidency, gave decisive support to the nuclear deal which greatly strengthened the position of Rouhani, the reform-minded centrist president.

Rouhani, in coalition with reformists and independent conservatives, wrested back control of parliament f-rom hardliners in February’s elections. This, some of his allies believe, should make it easier for the government to introduce business-friendly laws.

Yet four years ago, parliament passed a law intended to reduce the state’s role in the economy, put in place credible regulators and investor guarantees, and eventually get entities like those controlled by the IRGC to pay taxes. It has not been implemented.

Rouhani embodies popular expectations that IRGC-linked vested interests seem determined to thwart, some Iranian analysts believe, because sanctions have enabled them to win and keep control of the economy.

Hossein Raghfar, professor of economics at Tehran’s Alzahra University, says “there are many interest groups that have become very rich because of the economic crisis. They don’t want sanctions to be lifted.”

Saeed Laylaz, an economist close to Rouhani, says Iran’s economy was brought to its knees more by mismanagement than by sanctions. Jailed after hardliners cracked down on protests at the allegedly rigged presidential vote that gave Mahmoud Ahmadinejad a second term in 2009, he does not underestimate the hostility of vested interests towards a more open economy.

“I strongly believe some clear part of the regime has and had the project of creating sanctions against Iran to hide their mismanagement and their organized looting of economic wealth.”

To change the general atmosphere for business in the country, the Supreme Leader, the Revolutionary Guard and the judicial system must all be on board, Laylaz says.

“These are very important elements to attract foreign investment, just having the support of parliament doesn’t work at all. Because of this I am not too optimistic about it."

(Cre-ated by Samia Nakhoul, editing by Janet McBride)