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Trump threats loom over Iran-EU business summit

European executives say uncertainty over the fate of the nuclear deal and Iran’s sclerotic economic environment are bad for business.
Visitors walk past Total's stand at the 14th International Oil, Gas & Petrochemical Exhibition (IOGPE) in Tehran April 21, 2009. REUTERS/Morteza Nikoubazl (IRAN BUSINESS ENERGY) - GM1E54L1IS801

ZURICH — Uncertainty over what US President Donald Trump will do with the Iran nuclear deal hung over a conference here on Europe-Iran business that showcased both progress as well as continuing internal Iranian obstacles to foreign trade and investment.

European diplomats have put forward a tough and united front against any US reimposition of nuclear-related sanctions at a time when the International Atomic Energy Agency has repeatedly confirmed Iranian compliance with the 2015 agreement. But European executives appear less confident about their ability to shield Iran deals from a potential resumption of US penalties if Trump decides not to certify that Iran remains in compliance with the deal later this month.

“We should be able to continue to work,” Philippe Delleur, a senior vice president of the French train manufacturer Alstom, said in response to a question from Al-Monitor about the impact of a possible return of US sanctions.

At the same time, Delleur conceded that any such US action would negatively affect long-term financing for investments such as a recent Alstom contract to build railway and subway cars in Iran.

“The situation will not improve for sure,” Delleur said.

Because of unilateral US sanctions that were not lifted by the Joint Comprehensive Plan of Action (JCPOA) — sanctions that impede most US business in Iran — European companies have been the chief beneficiaries of the agreement. According to Masoud Khansari, president of the Tehran Chamber of Commerce, Industries, Mines and Agriculture, Iranian trade with European Union members doubled in the first half of 2017 compared with the same period last year.

“The next four years will be the most suitable time for development of economic relations between Europe and Iran,” Khansari told about 400 people gathered in Zurich at the fourth Europe-Iran Forum.

An survey commissioned by the website Bourse & Bazaar showed strong Iranian support for foreign investment in Iran and positive attitudes toward foreign products. German goods topped the list of those that found favor with Iranians in the poll conducted in August, with 69% of Iranians seeing German wares in a positive light. (While attitudes toward the United States were extremely negative, 44% of those polled had a favorable view of US products.)

Esfandyar Batmanghelidj, the founder of the Europe-Iran Forum, said the poll demonstrated an emerging vision for the future of Iran that is “open, innovative, productive and prosperous.”

 Iranian trade with European Union members doubled in the first half of 2017 compared with the same period last year.

In recent months, the French oil giant Total has signed a $5 billion contract with Iran to develop and produce natural gas. German, Swedish, Italian and Swiss companies have also returned to the Iranian market since the JCPOA was implemented in January 2016.

But Iranian officials have been disappointed that more major deals have yet to materialize.

Mehdi Karbasian, a deputy minister and chairman of the Ministry of Industry, Mines and Trade, told the conference that Iran’s goal is to attract $50 billion in investment from abroad over the next five years — a target that will be especially hard to reach if US sanctions return.

So far, no major European banks have come back to Iran since the nuclear deal. Some small- and medium-sized institutions as well as the export credit agencies of Denmark, Austria and Italy, however, are providing limited credit, as are banks in China and Japan.

Much of the discussion at the conference, in a five-star hotel overlooking the Swiss financial capital, focused on steps Iran could take to become more attractive to foreign and local investors — whether or not the Trump administration remains within the JCPOA. The Iranian banking sector has made strides in improving its conformance with international standards against money laundering and terrorism financing but is still struggling with antiquated reporting structures and billions of dollars in nonperforming loans.

Parviz Aghili, the chairman of Iran’s privately owned Middle East Bank, estimated that as much as 20% of bank loans in Iran were nonperforming. He said the government could not afford the $180 billion to $200 billion it would cost to restructure the banking sector in one go, and would instead move in phases over the next six years to give time for failing banks to increase their capital, merge with other financial institutions or close.

According to Mahdi Seifollahi, the chairman of financial data firm Pouya Finance, Iranian banks are improving their reporting standards, updating software and providing monthly activity reports. “The more frequently they provide data, the more transparent and reliable they get,” he said.

Ulrich von Zanthier, director for financial services at Dutch auditing giant KPMG, said Iranian banks should disclose their ownership structure to make it easier for foreign financial institutions to do the due diligence necessary before forming correspondent relationships. Already, he said, “There is improvement. I think we will get there.”

Other impediments to foreign interaction with the Iranian economy include myriad regulations and a labor force that is highly educated but lacks advanced management skills. The government has also been slow to privatize industries such as the pharmaceutical sector, where 40% of the market is still government-owned, according to Haleh Hamedifar, the chairwoman of CinnaGen, a local drug manufacturer.

Sharif Nezam-Mafi, who chairs the Iran-Swiss Chamber of Commerce, said labor costs 30% more in Iran than in India in part because of government regulations. He added that corruption remains a major challenge.

Having attended all four Europe-Iran forums since 2014, Nezam-Mafi said he keeps hearing about Iran’s “potential” for foreign investors. “When will it become a reality?” he asked rhetorically, answering, “When the government and private sector make the right decisions.”

Aseyeh Hatami, the founder and managing director of, which seeks to connect educated Iranians with job opportunities, acknowledged what she called a “disconnect” between foreign and Iranian business styles. She said that the more Iran is exposed to Western business practices, the more the gap will close.

“If the walls around Iran come down, if we have that international exposure, I believe Iran can grow a lot,” she said.

That depends, of course, in part on the nuclear deal surviving any new challenges from Washington.