Why US companies aren't rushing to do business with Iran

Two competing lines of thought continue to feed the debate in the US over whether closer business and economic ties should accompany America’s diplomatic opening to Iran.

As European companies from Airbus and Peugeot to oil-and-gas contractor Saipem lined up this week to sign deals with Iranian President Hassan Rouhani, news of the billion-dollar contracts raised a big question: Shouldn’t American companies be getting in on the bonanza, too?

After all, the United States is a signatory to the nuclear deal that granted Iran more than $100 billion in sanctions relief in exchange for steps reversing its nuclear program. Mr. Rouhani was in Italy and France this week spending some of Iran’s post-sanctions cash.

But two competing lines of thought continue to feed the debate in the US over whether closer business and economic ties should accompany America’s diplomatic opening to Iran.

One takes a cue from President Obama’s reasoning for dialogue with adversaries like Iran. That line of reasoning argues that by fully engaging, including through business and economic ties, the US can encourage the kind of cooperation, change in behavior, and ultimately political change it wants to see.

It’s the same argument used in support of twinning the Obama administration’s political opening to Cuba with unfettered US business access to Cuba and an end to the Cuba trade embargo.

On the other hand is the position, particularly strong in Congress, that US economic cooperation and the seal of approval of deals with American companies would only strengthen the Iranian regime and permit it to redouble its regional activities that run contrary to US interests – including underwriting terrorist activities.

Iran is one of three countries (along with Syria and Sudan) that remain on the US list of state sponsors of terrorism.

No one foresees an end to this debate any time soon, despite implementation of the nuclear deal and Europe’s roaring return to Iran. With continuing uncertainty about the long-term US approach to Iran, any rush by US businesses to seal deals with Iran seems very unlikely, Iran experts say.

“In the US, dealing with Iran comes with a tremendous amount of stigma,” says Trita Parsi, president of the National Iranian-American Council (NIAC), an organization that backs closer ties between the people of the two countries. “The things that are going to continue to hold up expanded US business activity with Iran are not a problem on the European side.”

Those factors range from the baggage of the Iranian Revolution and the 1979 Iran hostage crisis to US laws that remain on the books despite the nuclear deal.

But US non-nuclear sanctions will continue to discourage not just US businesses and banks, but their Western counterparts as well, from certain kinds of deals and investments with Iran.

Particularly chilling is the memory of a $9 billion fine the US slapped on Paris-based BNP Paribas in 2014 for violating US sanctions laws that prohibit running investments in Iran through US banks or subsidiaries based in the US.

“Much of the US unilateral sanctions regime remains intact, and these measures – along with some residual uncertainty about the longevity of the nuclear deal – will restrain the horizons of Iran’s economic and geopolitical reintegration into the international community,” says Suzanne Maloney, a Middle East scholar at the Brookings Institution in Washington, writing this week on the Brookings website.

Several of the top-tier Republican presidential hopefuls insist that they will act on Day 1 to pull the US out of the nuclear deal if they reach the Oval Office. Other Iran experts say that while they see little chance of the US exiting an implemented deal, they do foresee continuing reluctance on the part of US business to launch into the Iranian market.

“American companies look a little bit more reserved [than the Europeans] about the prospects of getting into Iran,” says Barbara Slavin, acting director of the Atlantic Council in Washington’s Future of Iran Initiative. “Companies are still scratching their heads about what their subsidiary companies can and can’t do.”

Some Iran experts say the European rush to dip into Iran’s heaping pot of gold risks sending the message to Tehran that its path forward faces few impediments.

In Italy’s rush to cover up nude statues that might offend the visiting Rouhani, Ms. Maloney of Brookings says she saw a Western readiness to placate Iran in ways that bode poorly for any future efforts to restrain Tehran by the international community.

“Iran’s rehabilitation without full-fledged reformation compounds the already urgent challenges of an unstable Middle East,” Maloney wrote Thursday. “Its reintegration can be a stabilizing force, but only if Tehran reconciles itself to the world, rather than the reverse.”

Other hardline opponents of the nuclear deal predict that continuing revelations about Iran’s destabilizing activities are going to keep economic participation in Iran controversial and make it unlikely the US will ease its unilateral sanctions anytime soon.

The Foundation for the Defense of Democracies, a Washington think tank that opposed the nuclear deal, published a report this week highlighting what the organization says are “unanswered questions” about Iranian-North Korean cooperation on missile development.

NIAC’s Mr. Parsi points to Mr. Obama’s action on Cuba and says there is still a lot the president can do “through executive order” to pave the way to expanded American business activity in Iran.

But he also notes that in the case of Cuba, Obama could make the case for  opening the way for US business to play a role as a change agent in Cuba because he  had strong support from US business interests.

“One idea you hear is that [Obama] will do something dramatic [on Iran] between the elections and leaving office ” in January 2017, Parsi says. “I wouldn’t rule it out, if there’s a constituency to back it. Without that,” he adds, “It’s not going to happen.”