A $500 Billion Maybe: Why Big Iran Moment May Be Years Away

(Bloomberg) -- For every investor who sees opportunity in a post-sanctions Iran, there are others who see the same old legal morass.

The Islamic Republic is banking on a nuclear accord with world powers to unleash a flood of foreign cash into an economy crippled by decades of sanctions. Companies including Royal Dutch Shell Plc, BP Plc and Total SA say they’re willing to invest in the OPEC member.

Major investments, however, may take years as companies weigh the risk of Iran violating the agreement, which would bring sanctions back, according to analysts and former officials. Decades of hostile relations with Western powers and tight scrutiny by the U.S. Congress and Treasury could also make many investors reluctant to jump back right away.

“Businesses have become terrified about doing business with Iran, and it’s not easy to un-terrify them,” says Trita Parsi, president of the National Iranian American Council.

Iran and six world powers led by the U.S. are holding talks in Vienna to reach a comprehensive accord to curb the Islamic Republic’s nuclear program in return for removing sanctions that have crippled its economy. Diplomats expect the negotiations to go beyond the self-imposed June 30 deadline.

“Nobody will be rushing to invest as they assess the likelihood of cheating by the Iranians,” says Richard Nephew, a former U.S. nuclear negotiator.

Iranian officials paint a different picture, saying interest from foreign investors has soared since April after the country signed a framework deal with a group comprised of the U.S., Germany, France, the U.K., Russia and China.

American Investors

About 20 foreign investors, including Americans, visited Tehran in May to examine opportunities in sectors such as cement, mobile telecommunications and food. Shell executives have also traveled to the Iranian capital to discuss possible partnerships, the company said Wednesday.

“You’ve got every single energy company, including Americans ones, just itching to get into Iran,” says Hans Hume, founder of the New York-based hedge fund Greylock Capital Management LLC.

A final accord would eventually help Iran initially access as much as $60 billion in frozen assets in overseas accounts.

Unlocking that money won’t be easy, analysts say. It also pales in comparison with how much is needed to revive the economy. Treasury Secretary Jacob J. Lew said in April that Iran’s domestic investment needs are estimated at $500 billion, which “far outstrips the benefit of sanctions relief.”

Congressional Review

No sanctions are likely to be lifted without a nod from the U.S. Congress, which has 30 days to review terms of the agreement, if a deal is reached by July 8. Any deal after that date will be under review for 60 days.

A final deal would also have to be endorsed by the UN Security Council, with a new resolution which may create two mechanisms to implement the agreement, according to two European diplomats.

One of them would be a dispute-resolution panel, likely including the Islamic Republic, the U.S. and five other nations, to address suspected breaches by Iran, they said.


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