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Iran: Let's Get Back To Business!

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One of the most politically complex issues confronted by the Western world is its handling of Iran. Thirty years of disputes, including eight years of ostracizing and economically boycotting Iran, have been totally ineffective, as was the Bush administration's more directly confrontational stance. The United States cannot drive Iran into bankruptcy because of Iran's ranking as the world's fourth largest oil producer. The boycott of Iranian banks because they handle the accounts of the Iranian Army was a particularly bad idea, since every substantial bank in the world handles army accounts. There are 44 foreign banks in Iran and the government recently decided to allow more foreign branches in the country. In other words, Iran's substantial oil revenues will find their ways into the banking system, regardless of the U.S. policy. It is time to reconsider one of the biggest failures of the U.S. foreign policy.

I am definitely not underestimating the threat that Iran represents to the world. Its possible production of nuclear weapons in a few years, its non-democratic regime and its anti-Israeli stance are particularly alarming. But we should not forget that it is also the second largest Jewish population in the Middle East after Israel. Their involvement in Iraq (with the consensus of the local leadership the U.S. put in place), with Hezbollah in Lebanon, and with Hamas in Palestine mean that the future of peace in the Middle East requires a serious reconsideration of our attitude vis-à-vis Iran. The enormity of the conflict is such that political progress, initiated with President Obama's first declaration on the subject, will take years to produce concrete results.

Does that mean that we should not try to (re)build normal business and trade relationships with Iran now? Do we need to continue to enforce an ineffective boycott? The question merits close examination for a number of reasons.

The last election and the following demonstrations have significantly damaged the united front of the leadership in Iran. For the first time since the revolution, the clerical leadership of the mullahs is deeply divided. Significant demonstrations protested against what every country knows but refuses to openly state: the elections were won by the opposition. But taking advantage of these divisions will require subtlety, certainly not confrontation. We cannot afford to support openly the opposition, but can support openness, especially in business.

When I first went to Iran for business in 1976, I was impressed by the quality, wisdom and shrewdness of their business leadership. After I joined the NYSE, those business interactions could only happen at global meetings such as the World Economic Forum, where the Iranian leadership was represented. They were keen to understand and develop capital markets. The Tehran Stock Exchange has quadrupled in market capitalization since 2000 and its trading was multiplied by five.

Now is the time for the administration to send a clear signaling that, in a measured and limited way, they no longer object to business dealings in sectors that carry no military or nuclear energy risks. The best way for the situation to improve, is for the Iranians to see concretely that the Western world is willing to deal with them in a fair way. This will strengthen the hand of the Iranian partisans of openness better than any statements or declarations.

It will also be good business for everybody. Iran needs to export as much as it needs to import. The fourth five-year plan provides for the creation of free trade zones to allow gateways to and from international markets. Free trade zones can become gateways for other positive exchanges as well. We should encourage them.

Even if the U.S. continues to refuse to do business with Iran, others will not follow its lead. Are we convinced that it is smart to let Russian, Chinese or Indian interests build businesses (and influence) in Iran? Is it the right policy to refuse to be part of the $ 10 billion of foreign direct investments in 2007 in beverage, tobacco, textiles, clothing, leather, chemical, steel and oil derivatives? Most of the largest European groups in the energy, automotive and engineering sectors already have substantial presence in Iran. The U.S. simply cannot continue to ignore this market.

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For those who would have any doubts, I have absolutely no contacts or cooperation activities with Iran and my comment are entirely based on my personal assessment of the situation, and its urgency.