Many politicians and business advisors believed that companies and corporations would be pouring into the world largest untapped market at full speed. Although all major United Nations Security Council sanctions have been lifted, there has not been a considerable amount of businesses entering the Islamic Republic.
In his latest speech, Iran's Supreme Leader, Ayatollah Khamenei claimed to know the reason by arguing that "The U.S. Treasury... acts in such a way that big corporations, big institutions and big banks do not dare to come and deal with Iran."
Khamenei's swift method of blaming the U.S. for almost everything domestically, regionally or globally is classic and politically-driven. It does not adequately and fully address the question concerning why corporations are still reluctant to do business with Iran.
First and foremost, big corporations and companies aim at opening businesses in a country where the social, political, and economic environment are stable.
As Steve, a CEO of an American company who was eager to do business with Iran (has obtained a waiver to operate in Iran but changed his decision few months after the sanctions were lifted) pointed out that
Iranian leaders rhetoric and attitude, that appear to have become more confrontational in the region particularly after the implementation day of the nuclear day, made us hesitate to whether it is safe to invest in Iran. Iranian leaders' words and actions are causing further political instability. And for us, political instability means high-risk in financial investment.
Large firms and corporations need an environment where they can aim at long-term investment rather than a short-term one. They prefer to open their own stores, provide services, hire people, and plan for many years of investment, so finally they can begin receiving the profits and fruit of their investments.
But the Islamic Republic is not making efforts to provide such a platform and make the process easier for businesses. Instead, the defiant senior cadre of Iran's Revolutionary Guard Corps (IRGC) have publicly launched ballistic missiles several times after the nuclear deal, provoking other countries and potentially causing a regional conflagration. Iranian leaders including the moderates have applauded such moves.
After the nuclear deal, the Islamic Republic began more publicly declaring its military, financial, intelligence and advisory role in several conflicts including supporting Bashar Al Assad's and the Iraqi government. Iranian leaders are also publicly calling on other Shiite proxies in the region to join the war in Syria or other parts of the region.
These actions talk about wars rather than peace, which businesses need. Rather than rejoining the forces of globalizations , cooperating with regional state actors, and building stronger political and economic ties with other countries in the region, the Islamic Republic has further distanced itself from other nations in the region after the nuclear deal.
"It is worth noting that political rhetoric of leaders of a country, the respect that they enjoy in their region, as well as the neutral or active position that they take towards conflicts do play crucial role in whether we are going to do business with that country or not" another CEO of an American company which has subsidies in France and Dubai pointed out.
Unfortunately, Khamenei's rhetoric, (not that different from that of Mahmoud Ahmadinejad, Iran's former President), is mostly incendiary and confrontational rather than being diplomatic.
Based on this, many companies do not desire to be linked to the Islamic Republic and run the risk of being alienated by other regional countries. Although, Iran has a significantly large, untapped market, the markets of other regional countries when combined together are much more lucrative than that of Iran. If businesses have to choose between Iran and other countries in the Middle East, they will choose the latter.
In addition, although Iran's business registry indicates that it takes between 13 to 15 days to open a business in Iran, the reality is that this process can take months and months due to the politics and corruption involved in the decision-making and due to the mistrust that Iranian ruling clerics have towards Western businesses.
More importantly, it is crucial to point out that the Supreme Leader and the IRGC, which exercise major control over the nation's wealth, political and economic life, desire that corporations do businesses on a state level with Iran rather than the private sector.
Most of the business deals which were carried out after the implementation day of the nuclear deal -- including in aviation sector or oil and gas industries -- were done between corporations and the Iranian government. In other words, the major beneficiary of these business deals were the government and IRGC.
The Islamic Republic makes it much more difficult for large corporations or smaller firms to do business with Iranian private sector and non-governmental companies. This is due to the fact that from the perspective of Khamenei and the IRGC, the more closed the economic system of Iran is, the easier they can control the population, maintain their comparative advantage and monopoly over the wealth.
Finally, if Iran wants more money flowing in or more businesses investing in this country, Tehran needs to change its behavior rather than blaming the rest of the world for its failure to attract investments. In addition, instead of pointing fingers at the US or other nations for why large corporations in the West are not doing business with Iran, Khamenei should watch more carefully his speeches and words. Moreover, Khamenei and the IRGC should change their desire to reap all of the business deals while depriving the rest of the country and private sector from doing business with the West. Currently, the best bet -- the most cost effective and low risk strategy -- for foreign companies and corporations is to focus on short term profit, use third parties in the region -- or to use their own foreign subsidiaries -- to indirectly sell their products in Iran through resellers and distributors.
Dr. Majid Rafizadeh is an American political scientist, business advisor and the president of the International American Council on the Middle East. Harvard-educated, Rafizadeh serves on the advisory board of Harvard International Review. An American citizen, he is originally from Iran and Syria, lived most of his life in Iran and Syria till recently. He is a board member of several significant and influential international and governmental institutions, and he is native speaker of couple of languages including Arabic and Persian. He also speaks English and Dari, and can converse in French, Hebrew.
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You can learn more about Dr. Rafizadeh on HERE. This post first appeared on The National.
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