European businessmen have had to deal with disappointment for a year, but they are hoping that a victory for Democratic presidential nominee, Hilary Clinton, in the US election next week could be helpful in breaking the logjam that has put a stop to any large-scale Western investments in Iran since its economy opened. A flurry of new deals haven’t been predicted in Europe even if Clinton is successful in beating her Republican rival, Donald Trump. However, there is hope that a victory for the Democrat could get rid of some of the political clouds that have been hanging over the nuclear deal of last year between the world powers and Iran.
According to business groups, this could end up pushing a more aggressive move into the Iranian market in the next year, especially in the second half, if Clinton’s victory leads to the re-election of Hassan Rouhani, moderate Iranian president, next May. They said that a victory for both Rouhani and Clinton would provide a huge political window of opportunity and most European companies and banks are waiting for it. The excitement felt by the business community in Europe had been palpable in January when Europe and the United States lifted sanctions concerning the nuclear program in Iran.
Since the Soviet-Union broke up in 1991, Iran was the biggest economy to become a part of the global trading and financial system as its annual output is greater than that of Thailand and it has a population of 78 million people. European politicians had moved towards Tehran and numerous corporate executives had followed them. Elected in 2013, Rouhani is a pragmatist and had been chosen for reducing Iran’s isolation. He traveled to Rome and Paris for promoting his country in front of eager investors. However, the euphoria had evaporated within a few months and it was replaced with frustration on both ends.
There are several European firms that wish to conduct business in Iran, but their biggest obstacle has bene the reluctance of some of the largest banks in the continent for financing deals. They are afraid that they could violate US sanctions, which could lead to huge penalties in the future. Steps have been taken by the United States for reassuring the banks. New guidance had been issued by the Office of Foreign Assets Control (OFAC) of the Treasury department last month. This was done with the purpose of allaying any concerns about conducting US dollar transactions with Iran.
However, this week, at a think-tank event in London, the Secretary of State John Kerry acknowledged that banks were still skittish. A visit by Daniel Fried, the US sanctions coordinator had led to some hurdles and German officials had expressed their concerns over it. This cautious attitude is probably going to prevail, regardless of who comes into the White House. Apart from the sanctions issue, there are some other deterrents such as the strong role of state in the economy, the condition of banks after a decade away from the international financial system and a lack of clarity about the laws.