Khamenei has himself to blame for Iran's lack of foreign investment

If Iran wants more money flowing in and more businesses investment, it needs to change its behaviour rather than blame the rest of the world, writes Majid Rafizadeh

Iranian car workers assemble a Peugeot 206 at the state-run Iran-Khodro automobile manufacturing plant near Tehran, Iran. Ebrahim Noroozi / AP Photo

After the nuclear deal with Iran, many politicians and business advisers believed that corporations would be pouring into the world’s largest untapped market at full speed. Although all major sanctions on Tehran have been lifted, this hasn’t been the case.

In a recent speech, Iran’s Supreme Leader, Ayatollah Ali Khamenei, claimed to know the reason for this by arguing that “the US Treasury ... acts in such a way that big corporations, big institutions and big banks do not dare to come and deal with Iran”.

Mr Khamenei’s habit of blaming the United States for almost everything is politically driven. It does not adequately address why corporations are still reluctant to do business with Iran.

First and foremost, big corporations want to open businesses in countries where the social, political and economic environments are stable.

I spoke to the chief executive of an American company that was eager to do business with Iran, obtained a waiver to do so and then changed its mind. He said that the Iranian leader’s rhetoric and attitude appeared to have become more confrontational after the implementation of the nuclear deal. Mr Khameini’s words and actions were causing further political instability in the region – “and, for us, political instability means high risk in financial investment”.

Large corporations need an environment where they can aim for long-term investment. They prefer to open their own stores or offices, provide services, hire people and plan for many years of investment. But Iran is making no effort to provide such a platform and make the process easier for foreign businesses. Instead, the defiant senior cadre of Iran’s Revolutionary Guard Corps have launched ballistic missiles several times since the nuclear deal, provoking other countries in the region. Even some of the moderate Iranian leaders applauded these moves.

After the nuclear deal, Iran more publicly declared its military, financial, intelligence and advisory role in several conflicts, including supporting Syrian president Bashar Al Assad. Iranian leaders are even calling on other Shiite proxies in the region to join the war in Syria.

Rather than cooperate and build stronger political and economic ties with its regional neighbours, Iran has further distanced itself from them.

The chief executive of another American company that has subsidiaries in the UAE and France said that the rhetoric of a country’s leaders, the respect they enjoyed in their region and the positions they took on regional conflicts “play a crucial role in whether we are going to do business with that country or not”.

Unfortunately, Mr Khamenei’s rhetoric – which is not that different to that of Mahmoud Ahmadinejad, Iran’s former president – is mostly incendiary and confrontational rather than diplomatic.

Many companies do not want to be linked to Iran if that means running the risk of alienating other countries in the region. Although Iran is a significantly large, untapped market, the combined markets of other regional countries are much more lucrative. 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 and 15 days to open a business, the reality is that this process can take many months due to the politics and corruption involved in the decision-making processes and to the mistrust that the country’s ruling clerics have towards western businesses.

More importantly, it is crucial to point out that the Supreme Leader and the Revolutionary Guard, who exercise major control over the nation’s wealth, political and economic life, want corporations to do business with Iran on a state level rather than through the private sector.

Most of the business deals that were carried out immediately after the implementation of the nuclear deal – including those in the aviation sector and the oil and gas industries – were between corporations and the Iranian government. The major beneficiaries of these deals were the government and the Revolutionary Guard.

Iran makes it much more difficult to do business with the private sector, because the more closed the economic system is, the easier Mr Khameini and the Revolutionary Guard can control the population and maintain their comparative advantage and monopoly over the wealth.

If Iran wants more money flowing in and more business investment, it needs to change its behaviour rather than blame the rest of the world. Mr Khamenei should be more careful when he speaks, and he should stop blocking the private sector from doing business with the West.

Dr Majid Rafizadeh is an Iranian-American scholar and president of the International American Council on the Middle East

On Twitter: @Dr_Rafizadeh