Iran economy faces ‘layers of uncertainty’ after Trump statement
Iran economy faces ‘layers of uncertainty’ after Trump statement
The real problem in Iran right now, everyone in the international business community agrees, is uncertainty.
That was not helped by Trump’s announcement on Friday that he would waive nuclear-related sanctions, but only once more and that Europe must work with Washington to “fix the deal’s disastrous flaws, or the United States will withdraw.”
“No one has any idea what’s going on. Trump has introduced so many layers of uncertainty,” a Western trade official in Tehran told AFP on condition of anonymity.
“That’s not necessarily negative. Things could actually improve if Trump pulls out of the deal. The Europeans could stay and the EU could provide protections for its industries against US sanctions,” he said.
“Or things could get even worse. We just don’t know.”
On the surface, Trump’s vitriolic stance appears disastrous for the 2015 nuclear deal between Iran and world powers, which lifted many sanctions in exchange for curbs to the country’s nuclear program.
Even as he confirmed the waiver of nuclear sanctions on Friday, Trump added yet more sanctions related to human rights and Iran’s missile program, adding to a vast web of restrictions that have scared off many Western companies.
Major foreign banks have been particularly cautious of re-entering Iran, dreading a repeat of the record-breaking $8.9 billion penalty levelled on France’s BNP Paribas for breaching US sanctions on Iran and other countries.
There seems little hope of hitting the government target of $50 billion in foreign investment per year, with the government saying less than $3.4 billion was achieved in 2016.
But European diplomats say a lot is happening behind the scenes.
Deals for things like industrial equipment, solar parks and dairy farms have been quietly building over the past two years.
“I’m still cautiously optimistic,” said a European diplomat.
“Many firms have invested so much they can’t pull out. They will find a way to make it work whatever Trump does.”
The big difference under Trump is secrecy.
“Deals are going on in complete silence. There’s no advantage to discussing it. Many have interests in the US or an American investor. They don’t want to make themselves a target,” said the Western trade official.
Some bigger firms — particularly the French — have been less coy.
French energy giant Total signed a $5 billion gas deal in June, while carmakers Peugeot and Renault have already reopened production lines.
Italy pointedly announced a $6 billion credit line for development projects just days before Trump’s latest attack on the deal.
“The divide between Europe and the US is widening. It’s been more than a year that President Trump is trying to undermine this deal but he’s basically failing,” said Farid Dehdilani, international affairs adviser for the Iranian Privatization Organization.
Nonetheless, the initial excitement that accompanied the nuclear deal has evaporated.
“I was working in the stock market when the deal was signed, and we were so excited and hopeful, but when I check with friends in brokerages now, nothing is happening,” said Tehran-based economic analyst Navid Kalhor.
“The only sectors that get any interest are commodities: oil, mining, petrochemicals. But oil money cannot solve all our problems,” he said.
Iran’s return to international oil markets helped propel its economic growth rate to more than 12 percent last year, but unemployment remains huge and the energy sector can only create few jobs at a time.
“Look at the protests — ordinary people are not optimistic about the future,” said Kalhor, referring to the deadly unrest that rocked dozens of Iranian cities over the new year, sparked by anger over unemployment and poor governance.
“We need better and more reliable trade partners, and more access to international markets. We are mostly borrowing money rather than attracting investment. This can cause more problems in future when we have to service our debts. It’s a vicious circle,” he added.
The problem, many Iranians are quick to emphasise, does not lie just with Trump.
Years of mismanagement and corruption would make Iran a tricky investment destination even without US antagonism.
“We have to facilitate foreign investment by eliminating unnecessary bureaucracy: the three or four months needed to get permits, for instance,” said Dehdilani.
“In the end, the success of the nuclear deal relies on Iranians.”
French state-owned bank drops plan to aid trade with Iran
PARIS: French state-owned bank Bpifrance has abandoned its plan to set up a mechanism to aid French companies trading with Iran, in the face of US sanctions against Tehran.
Earlier this year, the bank had said it was working on a project to finance French companies that wished to export goods to Iran despite US sanctions.
“It’s put on hold,” said Nicolas Dufourcq, Bpifrance’s chief executive. “Conditions are not met (...) Sanctions are punitive for companies.”
Bpifrance was working on establishing euro-denominated export guarantees to Iranian buyers of French goods and services. By structuring the financing through vehicles without any US link, Bpifrance thought it was possible to avoid the extraterritorial reach of US legislation.
Dufourcq’s latest comments show how the scope of the sanctions is making trade with Iran increasingly difficult for European companies.
The United States is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. Washington reimposed some of the financial sanctions from Aug. 6, while those affecting Iran’s petroleum sector will come into force from Nov. 4.
Even though several European countries have said they are seeking to protect their companies from the sanctions, several major companies including oil company Total, Air France-KLM and British Airways have announced they would suspend activities in Iran.
German officials have in recent weeks advocated for the creation of an independent system for cross-border payments to make trade with Iran possible even with the US sanctions.
European Union diplomats have said US President Donald Trump’s positions on trade and on Iran were fueling a rethink about the EU’s dependency on the US financial system.
However, European countries appear to be struggling to find or agree on effective options to tackle the issue.