If there’s one thing guaranteed to get Donald Trump riled, it’s getting the short end of the stick. And that, according to “The Donald”, is exactly what the US got with the signing of the Joint Comprehensive Plan of Action (JCPOA) – the deal that granted Iran relief from international economic sanctions in return for a major scaling down of the country’s nuclear programme.
Before winning the White House, the new US president excoriated and derided the JCPOA as “the worst deal ever negotiated” and threatened to “dismantle” it. Nevertheless, in the days preceding and following the inauguration of Trump, several international companies quickly signed off on deals in bids to outmanoeuvre any possible interventions from the new administration.
Many potential foreign investors in Iran are most certainly playing a wait-and-see game with Trump, hoping he is all bluster and no action On November 11, EU foreign policy chief Federica Mogherini told CNN it must be recognised that the JCPOA is a multilateral deal and not a bilateral deal which one country can unilaterally rip up if it so chooses. “It was not concluded with one country or government, but was approved by a resolution of the UN Security Council, and there is no possibility that it can be changed by a single government,” said Mogherini.
It is such comments from figures like Mogherini that have persuaded a good number of international companies, ranging from oil giants to aerospace manufacturers – whom Tehran was not even permitted by the UN Security Council to enter into business talks with during the final phase of the sanctions era – to make a dash for the entrance door into Iran before Trump took the helm. Even though the “snapback” sanctions built into the nuclear deal are not supposed to be activated unless Iran commits major JCPOA infringements, there must still be a tangible fear among the dealmakers that Trump – certainly based on his no-holds barred performance of recent days – will attempt to get around that qualification.
If, however, he’s going to go in all guns blazing, he’ll be dealing not just with investors who are considering deals, but with some big companies who, pre-empting any return of sanctions, are already in Iran ploughing ahead regardless.
One of those is the France-based European aerospace giant Airbus. Great excitement was generated among the Iranian population on January 12 when an Airbus A321, the first Western-made airliner to be delivered to Iran in decades, was handed over with full livery to IranAir. Indeed, such was the enthusiasm that the national carrier sent the 189-seat aircraft on a national tour to show it off at various airports before commissioning it for international flights.
IranAir is expecting seven new planes to be delivered by Airbus within the first quarter of this year as part of a deal worth around $10bn for 100 aircraft. It has, meanwhile, also signed agreements with Airbus, Boeing and ATR for the delivery of parts for its elderly aircraft. The average age of IranAir’s fleet is just over 27 years, with some aircraft only operational thanks to improvised or smuggled parts, say aviation industry experts.
Boeing – one of the big hitters at home that Trump will have to face down in any attempt at truly wrecking the nuclear deal – is naturally not minded to content itself with parts delivery to the new-era Iranian market. The Chicago-based airplanes, rockets and satellites corporation, which has not delivered a plane to Iran since 1977, last December agreed a contract to supply Iran with 80 aircraft valued at $16.6bn. Butting in on this deal could get uncomfortable for the commander-in-chief and Congress. Struck under the conditions of a US government licence issued the previous September, the agreement with IranAir will support almost 100,000 jobs in the US aerospace industry.
Speaking to Bloomberg on December 11, Loren Thompson, a defence analyst with the Lexington Institute, observed that Iran is a critical market for Boeing in its worldwide competition with Airbus. “Boeing can’t compete with Airbus if it can’t sell to places like Iran and China. Selling to Iran is a business imperative for Boeing," she said.
German airline Lufthansa is another aviation player that’s been signing on the dotted line with Iran. On January 19, it announced a Lufthansa/IranAir code-sharing agreement that had been blessed by the Tehran airport authorities. It commences on February 1.
The Iran Airports and Air Navigation Company and German firms Fraport AG Frankfurt Airport Services Worldwide, Munich Airport, and Dornier Consulting International GmbH have also not been deterred by threats emanating from the Washington bully pulpit. On January 18, they put pen to paper on an MoU that could lead to the overhauling of airport infrastructure in Iran. According to the Tehran Times, at the signing German Federal Minister of Transport and Digital Infrastructure Alexander Dobrindt agreed a bilateral taskforce to develop mutual cooperation in different transportation areas and expressed the readiness of Munich and Frankfurt airports to engage in cooperation and development to the benefit of Iranian airports. They presently suffer from several difficulties caused by a paucity of investment and management issues.
Iran thrilled by FDI lift-off
Before it became clear that Hillary Clinton faced a real threat of losing last November’s American election to the former reality television star, foreign direct investors were nothing if not busy in Iran. In something of a PR coup, Iran was on January 14 able to boast of a threefold post-sanctions jump in foreign direct investment (FDI) in the current Iranian year to date (the year started on March 20, 2016). Speaking to Iran’s Financial Tribune English daily on January 26, Seyed Hossein-Salimi, head of the Foreign Investment Group linked to Iran's Chamber of Commerce, Industries, Mines and Agriculture, said the increase meant foreign investors had injected around $11bn in FDI into the economy over roughly 10 months.
The official figure given by Hossein-Salimi did not even take into account many smaller investments in the Islamic Republic pursued by private companies not affiliated to the business chamber.
Also struggling not to crow over some robust figures is the Tehran Stock Exchange's PR department. On January 17, it revealed Iran’s flagship bourse had enjoyed a 42% increase in flows of foreign capital over the past year. In the year that followed the January 2015 removal of sanctions, over 200 foreign investors invested cash in the main indices.
The Putin factor
Another difficulty for the Trump administration, should it choose to try to renegotiate, or perhaps gut, the JCPOA, is Russia. Renegotiating the North American Free Trade Agreement (Nafta) with Mexico is one thing, and pulling out of the Trans-Pacific Partnership (TPP) is another, but however pally his relationship with Vladimir Putin will Trump fancy demanding that the Kremlin supremo block Russia's Gazprom from developing a multi-billion-dollar gas pipeline in Iran? The potential for a joint venture to that end has been announced by the National Iranian Gas Company (NIGC). “The pipeline project, worth $2.5bn, can be implemented in terms of engineering, procurement, construction and financing if the licences are granted by the government," Hamidreza Aragi, a deputy oil minister remarked on January 22.
Groups such as the American Coalition Against Nuclear Iran or United Against a Nuclear Iran (UANI) may list an intimidating range of risks in doing business with Iran – take their claims of kidnap and arrest risk, front company risk, insurance risk and hacking and cybersecurity risk for starters – but Europe doesn’t appear to be listening. January 24, for instance, was a good day for the Iranian passenger cars market with the Mammut Group announcing it was setting up a production line with Germany's Volkswagen to assemble VW Polo hatchbacks, just one of several models it hopes to eventually turn out.
So where does it all end? Those with a stake in the issue might wonder if Donald Trump will bring up the foreign-assisted Iranian business boom during his first meeting as president with a foreign leader, with UK Prime Minister Theresa May, on January 27. Addressing a Republican retreat a day before meeting with US President Donald Trump at the White House, PM May talked tough on Iran’s malign influence in the region, though also said that the while the nuclear deal was “controversial... it has neutralized the possibility of the Iranians acquiring nuclear weapons for more than a decade”. Those statements were received in silence, as opposed to the warm reception she got for the rest of the speech.
Given that financing is often the most awkward hurdle faced by FDI into Iran, May will probably try to avoid mentioning one particular tussle her government found itself in mid-January. Accounts of how the Royal Bank of Scotland rebuffed efforts by her civil servants to coax it into facilitating trade with Iran as too risky could leave Trump wondering what the British officials were doing making such a proposition in the first place?