Investing In Iran Is Still A Key “Uncertainty” Investment
Investing In Iran Is Still A Key “Uncertainty”
Expect Iran will receive much less than $500-B it needs to modernize its infrastructure because foreign banks are still unwilling to risk penalties from the US Treasury.
The projects are ready, but the problem is Iran needs more help from the West, and do not see any big banks venturing there in the next 5 years at least.
There are projects worth about $200-B, including the master-plan for the second terminal at the $50-M Imam Khomeini Airport City project near Tehran, also there are plans to develop FTZ’s (free-trade zones), including the expansion of Bandar-e Anzali on the Caspian Sea to boost Russia’s access to Iranian markets, will need approximately $240-B.
While international sanctions imposed over Iran’s nuclear activities were lifted in January following the deal with world powers last year, others related to alleged links to terrorism and ballistic missiles remain in force.
That may impede Iran’s efforts to attract as much as $50-B a year in foreign investment.
Iran’s supreme leader Ayatollah Ali Khamenei has accused the US of failing to fulfill its commitments in the nuclear deal. Authorities are still freezing bank accounts and preventing money from being repatriated to Iran, he said in a recent TV speech.
Iranian companies are getting frustrated at the slow progress in securing overseas financing, despite a flurry of foreign delegations arriving in Tehran to sign MOUs (memorandums of understanding).
Foreign investors will probably limit their exposure to small projects of up to $100-M until they become more confident of the legality of investing in Iran.
Most of the transactions and the project valuations are in US dollars, and European companies don’t know how or where to receive this money when it comes to Iran. And as soon as a single US dollar from Iran lands in their bank accounts, it’s sanctioned.
The legacy of punishments on banks found to have dealt with Iran while the country was subject to sanctions lingers.
Many companies are interested in entering Iran, but the lack of assurances from the US Treasury about doing business there is “creating a lot of uncertainty.