Iran’s Supreme Leader Wants Western Business For The State
Many people believed that companies and corporations would be pouring into Iran, the world largest untapped market at full speed, but that has not happened.
Although all major US Security Council sanctions have been lifted, there has not been the amount of businesses entering the Islamic Republic that was expected.
In his latest speech, Iran’s Supreme Leader, Ayatollah Khamenei argued 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.”
Ayatollah Khamenei’s blaming of the US for problems domestically, regionally or globally is politically-driven. It does not address the question concerning why corporations continue to be reluctant to do business with Iran.
The Key reason is that big multinational corporations and companies look to open businesses in a country where the social, political, and economic environment are stable.
The rhetoric and attitude of Iran’s leaders appears to have become more confrontational after the “Implementation Day” of the nuclear day, made people hesitate to whether it is safe to invest in Iran. Iranian leaders’ words tell of political instability, and that 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.
Islamic Republic is not making efforts to provide such a platform and make the process easier for businesses.
Instead, Iran’s Revolutionary Guard Corps (IRGC) have publicly launched ballistic missiles several times after the nuclear deal, provoking Key countries and potentially causing a regional conflagration.
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 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 not Peace, which businesses need.
Rather than rejoining the forces of globalization, cooperating with regional state players, and building stronger political and economic ties with other countries in the region, the Islamic Republic has distanced itself from other nations in the region after the nuclear deal.
The Khamenei rhetoric is mostly incendiary and confrontational and not diplomatic.
Given that stance, many companies do not wish to be linked to the Islamic Republic and run the risk of being alienated by other regional countries.
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 MENA, they will not choose Iran.
Also, even though 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.
So, it is Key o 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 and not in the private sector.
The business deals which were carried out after the implementation day of the nuclear deal, including in aviation sector or Oil & Gas industries were done between corporations and the Iranian government. Meaning that the major beneficiary of these business deals were the government and IRGC.
This evolves from the fact that from the perspective of Ayatollah 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.
So, if Iran wants more money flowing in or more businesses investing in this country, it needs to change its behavior rather than blaming the rest of the world for its failure to attract investments.
Ayatollah Khamenei and the IRGC should change their plan to reap all of the business deals while depriving the rest of the country and private sector from doing business with the West.
The best way for foreign companies and corporations is to focus on short term profit, use 3rd parties in the region, or to use their own foreign subsidiaries to indirectly sell their products in Iran through re-sellers and distributors.
Expect it to be many years before the West embraces business with Iran privately.
Latest posts by Paul Ebeling (see all)
- F1: Ferrari (NYSE:RACE) Returned to Form at US Grand Prix - October 23, 2018
- The US is in a ‘Great Economic Boom’ - October 23, 2018
- It is Not a Migrant Caravan, It is a Migrant Invasion - October 23, 2018