A wild push to invest in a newly opened Iran is raising the costs to European powers of reintroducing sanctions well beyond what is politically viable. American firms will not be enriched along with European and Russian ones, however, as the Ayatollah declares all roads closed that might increase American influence in the country.
The Wall Street Journal reported last week that Italian corporate giant Finmeccanica signed a deal with an Iranian counterpart identified by the United States Department of the Treasury as part of a “a shadowy network of off-the-books front companies” owned by Iranian leaders. Italian Foreign Minister Paolo Gentiloni has led a delegation to Iran to seek business investment opportunities, and a major Italian bank has signed a memorandum of understanding with the Iranian authorities that will permit large sums of European cash to flood into the Iranian market.
Along similar lines, Business Insider reports that Switzerland has already declared — well in advance of the United States Congressional vote on the wisdom of the deal — that it will drop all sanctions barring investment or money transfers with Iran. These include sanctions on petroleum and its derivatives, as well as sanctions on precious metals. The United States Department of State was caught off guard by the Swiss move, about which they were neither informed nor consulted beforehand. “[M]ore than any other, Switzerland’s move displays evidence of the lack of US teeth on the issue,” Business Insider notes:
US State Department spokesman warned Swiss companies earlier this week that they are still subject to US sanctions on Iran. But the spokesman also admitted that the US was caught almost entirely off-guard by the move.
“We intend to continue aggressively enforcing those sanctions,” State Department spokesman Mark Toner said. “But as to specifically what these sanctions were that lifted and how they’ll affect, we’ll have to look into that and get back to you with more detail.”
Reuters likewise reports that a parade of delegations from European nations have already been visiting Iran to pursue contracts to invest in its refinery infrastructure. Gasoline has heretofore been a major method by which foreign powers could influence Iran, one that could effectively target its Guard Corps in a way that technological sanctions could not, as Iran has vast oil reserves but very limited refinery capacity. European players have decided to pursue at least a hundred billion dollars in contracts that would remove this lever from Western control in the event that Iran should later fail to live up to the terms of the deal. “Business prospects in the sector were also discussed during a string of trade visits from Italy, Germany, Japan and other countries in recent weeks,” Reuters notes.
All of these investment will make it harder for European powers to make the political choice to “snap back” sanctions in the event that Iran stops living up to the terms of the deal. The gasoline investments in particular will disable one kind of sanctions from being the effective lever it has been in the past. There are questions about whether “snap back” sanctions can be reintroduced by Congress under the deal as written, but especially in the case of gasoline sanctions it may simply not matter. Iran will be increasingly free from the threat such sanctions pose.
It might be argued that the investments will increase the influence of Europe on Iran, as Iran certainly wants the flow of technology and cash. No such similar argument exists for American influence, as was made clear by recent remarks by Iran’s Supreme Leader. The Ayatollah Khamenei said that all roads to increasing American cultural or economic influence are closed. Reuters quotes Sarah Dayan, analyst at the consulting firm The Rick Advisory Group in London, agreeing that “”It will be a long time, regardless of whether the deal goes through, before U.S. businesses will fully operate in Iran.” U.S. firms will face both tough inroads into an Iran whose government is suspicious of them, and some additional difficulties from our own government. Unlike the Swiss, who are dropping all sanctions against Iran, the United States will retain some of our sanctions even if the deal is adopted. Therefore, U.S. firms will not prosper from what the Wall Street Journal calls “the Ayatollah Gold Rush,” nor will they serve as an influential lever after the deal.
