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International companies reconsider investment in Iran

Iran’s economy and business community are in transition, creating both risks and opportunities for international investors.
Irani workers weld the pipeline during a groundbreaking ceremony to mark the inauguration of the Iran-Pakistan gas pipeline, in the city of Chahbahar in southeastern Iran March 11, 2013. Ahmadinejad and Zardari marked the start of Pakistani construction on the much-delayed gas pipeline on Monday, Iranian media reported, despite U.S. pressure on Islamabad to back out of the project. REUTERS/Mian Khursheed  (IRAN - Tags: POLITICS ENERGY BUSINESS) - RTR3EUST

Amid the implementation of the Joint Plan of Actions between Iran and the so-called P5+1 (five permanent members of the UN Security Council and Germany) and the consequent sanctions relief, international companies that are interested in re-engaging the Iranian market are faced with an important reality: In the past decade, Iran’s business community has transformed from being one dominated by public companies to one where semi-state institutions (revolutionary and religious foundations, pension funds as well as military organizations) play the most significant role. In addition, in terms of type and volume of activity, the private sector has reached new heights, especially the companies that have successfully engaged in export business.

International observers have focused on the growth of semi-governmental organizations and have wrongly concluded that the Iranian economy is now dominated by the Islamic Revolutionary Guard Corps (IRGC). However, the IRGC-related companies are only one of many categories of institutions that operate in the gray zone between the public and private sectors, since they are not accountable to the government per se. Obviously, they cannot be considered private, because they are affiliated with state institutions such as the Supreme Leader’s Office, religious authorities or military entities. Such institutions have mainly increased their economic role during the absence of international companies in the Iranian market. However, now that the government is trying to attract international investors, the semi-state sector will continue to operate as an integral part of the business community.

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