Despite the Lifting of Sanctions, Why Iran's Economy Has Plunged Into Recession? – Part 5-5
- Friday, 23 December 2016 08:27
NCRI - A year after signing the nuclear deal, while significant problems such as export restrictions and the prohibition of the international bank transfer (swift) have been resolved a transparent atmosphere is created to identify the radical economic problems of Iran.
In previous parts, to answer the main question: “why the recession is becoming deeper while the sanctions are lifted and the international transaction with Iran has been opened.” We examined the following factors in Iran’s economy:
• Lack of security and stability
• Domination of the Guardianship of the Islamic Jurist in the country
• Power struggle
• Financial instability
• Widespread corruption
• Lack of competition and cumbersome regulations
• And International Barriers, the following is the final part
• And International Barriers, the following is the final part
Part five:
International Barriers
the Vali-e-faqih Khamenei said in his public speech in March this year that ”Today, throughout the western countries and those influenced by them, we still have difficulties performing our banking transactions, getting our money back from their banks, and doing business deals which require involvement of their banks; once investigated, it turns out that they’re afraid of the Americans. This is what we see today in front of our eyes; a total loss.”
In his meeting with Italy’s prime minister in Tehran on April 12, Khamenei said that “the important issue regarding these visits and negotiations with foreign countries, is that the agreements be implemented. Some governments and European companies are visiting Iran and conducting negotiations, but the result of these negotiations have not yet been significant… the Americans do not perform their obligations in the nuclear deal as they should and are scaring the other parties away from collaboration with Iran.”
Earlier, the US President Barak Obama had said in his speech on 1 April 2016 that “Iran should ensure the international community that it will stop its provocative measures which causes panic and concern among the investors. When Iran launches intercontinental ballistic missiles marked with “Israel must be wiped out”, these measures contain the message that the geopolitical risks are still in place, risks which make the investors concerned. Sending missiles for Hezbollah causes distrust among the investors. Iran needs to realize that the investors tend to go to a country where they feel secure.”
These statements give a clear picture of the obstacles which have basically stopped Iran’s financial transactions with the West: on one hand, there are Iran’s measures such as supporting terrorism, implementing a continued aggressive policy in the region, development and test-firing of ballistic missiles despite being in violation of the UN Security Council Resolution 2231, and continuous human rights violations.
On the other hand, there is a deep distrust and uncertainty among Western banks and companies who are not willing to endanger their assets in Iran. As a result, according to the July 16th report of Iran’s Foreign Ministry to the Parliament, ”transfer and conversion of currencies are still subjected to some restrictions” … “one of the current challenges” is the effect the non-lifted sanctions, like those related to missile program or human rights, have on nuclear sanctions, with the least of them being “psychological effects and causing confusion among businesses.”
Despite being permitted to provide the Iranian government with American Dollar Bills, foreign banks refuse to transfer US Dollar for natural and legal persons associated with of the Islamic Republic of Iran’s government.”
Despite being permitted to provide the Iranian government with American Dollar Bills, foreign banks refuse to transfer US Dollar for natural and legal persons associated with of the Islamic Republic of Iran’s government.”
“Many expectations need a longer time in order to be met” and “from a technical and operational point of view, going back to the pre-sanctions state will definitely take time, just like reconstructing a country ruined by a 10-year-old war.”
“Being completely disconnected from the international financial system”, the Iranian banks are not familiar with the changes made in the banking sector and issues like disciplinary rules on combating against money laundering and funding terrorist groups.
“Enjoying huge profits thanks to sanctions, some dealers take any opportunity to destroy the post nuclear deal era, by taking advantage of or even fueling the political differences.“
This situation has made trading with Iran for foreigners be subjected to numerous political and legal risks, some of which are as follows:
Foreign investors are subject to extremely high risks associated with financial corruption (particularly bribery), especially the risk of severe financial and criminal penalties due to violating the US “Foreign Corrupt Practices Act” as well as the British “Bribery Act.”
Foreign investors are subject to extremely high risks associated with financial corruption (particularly bribery), especially the risk of severe financial and criminal penalties due to violating the US “Foreign Corrupt Practices Act” as well as the British “Bribery Act.”
Risks related to arms export, considering Iran’s active involvement in sending weapons to Bashar Assad’s dictatorship as well as terrorist and militia groups in the Middle East. This puts private companies involved in providing security services at serious risks. Also companies working in telecommunication and information technology are faced with critical challenges.
Considering numerous resolutions issued by the UN General Assembly on Iran’s human rights violations, with the latest one in December 2015, the companies trading with Iran are subject to the risk of being accused of providing a barbaric dictatorship with the tools used in torture, repression, eavesdropping and internet censorship.
Companies active in the internet and digital communications sector that are doing business with Iran are subject to the risk of violating the laws to ensure net neutrality, freedom of expression and protecting personal privacy, by participating in operations that promote violence and hatred against followers of religions, women and oppressed ethnic groups.
Investing and exporting companies are obliged to follow the so-called Due Diligence Procedures which comply with international standards contained in the “UN Guiding Principles on Business and Human Rights” and the “OECD Guidelines for Multinational Enterprises.”
It is very unlikely that any company in this situation could follow the due diligence procedures when doing business with Iran.
A more important risk is to get involved in money laundering operations which is being actively practiced by the Iranian banks and companies.
Another risk is doing business with companies and entities involved in funding terrorist groups such as Hezbollah in Lebanon. The Hezbollah International Financing Prevention Act was approved by US Congress in 2015, following which the Lebanese Central Bank blocked nearly 100 bank accounts linked to Hezbollah at the request of the United States. Afterwards, Hezbollah’s leader Hassand Nasrallah said in a public speech that “these restrictions have no effect on Hezbollah’s situation as the group’s financial resources are coming not from banks, but from Iran… the money reaches us the same way the missiles with which we threaten Israel do.”
Besides, there is the risk that the foreign companies be punished by the United States for doing business with Iranian companies that are supporting the Quds Force. For instance, on May 20, the US Treasury imposed sanctions on the Iraqi “Al Naser” and the UAE “Sky Blue Bird“ companies for helping Mahan Air by acting as mediators in acquiring second-hand Airbus aircrafts for the Iranian company. Mahan Air is widely known as the airline supporting the Revolutionary Guard’s Quds Force.
The End
