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Investor Interest in Iran Renews Concerns of Failing Sanctions

Foreign investors from more than half a dozen major automobile corporations flocked to Tehran this week to participate in the country’s auto show, driving concerns that the Iranian economy is steadily recovering amid a de-escalation in sanctions pressure on the Islamic republic. Experts have for more than a year warned that a feeding frenzy would take hold as sanctions against Iran modestly eroded, with nations and companies scrambling to avoid getting left behind in the rush back into the Iranian market.

Obama administration officials had earlier this year repeatedly insisted that the interim Joint Plan of Action (JPA) would not leave Iran open for business, and on Monday State Department Spokeswoman Jen Psaki, speaking at the State Department’s daily press briefing, fielded a question about the auto show’s international participation, telling reporters that Iran “is not yet open for business… That’s obviously still the case.”

Iranian President Hassan Rouhani in September boasted that Iran’s post-JPA economy had managed to recover from what had been a multi-year stagnation, the result of Western sanctions that had been widely credited with bringing the Iranians to the negotiating table:

“The calculations for the first quarter of the year confirm that Iran has left behind the stagnation period,” Rouhani said in the holy city of Mashhad.

“Today, we have to join our hands for the growth and prosperity of the country,” he said.

The auto show comes amid reports that Peugeot, which halted production in the country in 2012, is in talks with the Islamic republic to again enter the Iranian market. Sanctions on the Islamic republic’s automotive industry were lifted as part of the interim agreement reached by Iran and the P5+1 powers that was put in place earlier this year:

“We are in intense discussions,” he [Jean Christophe Quemard, PSA’s operations director for the Middle East] said.
“We have a long relationship with Iran. We have the strong will to create a joint venture covering the entire automotive chain as soon as possible.”

Diplomats last month announced that they would extend the interim agreement – which has provided the Iranians with sufficient economic relief to begin stabilizing their economy – through June 2015. Iran is expected to, under the terms of the extension, receive approximately $700 million per month in unfrozen oil revenues.

[Photo: Petrick / Flickr]