Open for Business?

Iran may be continuing its global charm offensive, but the U.S. government is still having trouble selling changes in Iran policy to an American audience.

The latest example came late last month, following Iranian President Hassan Rouhani’s trip to Davos, Switzerland. During his appearances at the World Economic Forum, Rouhani invited gathered world and corporate leaders to take advantage of the opportunities that the opening up of Iran offers. But such encouragement is only likely to provoke ire in Washington, a point underscored just days later when U.S. Undersecretary of State Wendy Sherman was grilled by the Foreign Relations Committee over fears that the foreign firms lining up to do business with Iran could diminish Washington’s leverage in negotiations over Iran’s nuclear program.

It’s a compelling argument on the surface. But it is also one that belies a misunderstanding of the reality on the ground – and how the situation is viewed from within Iran.

“Most of these delegations appear to be going to get themselves in line for the day when, in fact, a comprehensive agreement is reached, if it is reached,” Bloomberg quoted Sherman as saying. “And we have told them all they are putting their reputations, themselves and their business enterprises at risk if they jump the gun.”

But the idea that business should continue to hold back for political reasons is not only unviable, but could be counterproductive. Indeed, insisting that Iran is still not open for business suggests that many policymakers in the United States are underestimating the importance of communicating properly in this conflict, especially towards an Iranian public yearning for signs that their economic lot is close to improving.

International firms flocking to Iran are preparing for the moment sanctions are properly lifted. Yet rather than undermine the U.S. position, preparatory activities are actually raising expectations among business people and the broader public in Iran that there is light at the end of the tunnel. Such optimism could also help bolster Rouhani’s standing vis-à-vis his hardline opponents, who have been sharply critical of a deal with the United States.

Ultimately, the debate over Iran’s nuclear program is about the perception of who is right or wrong, and the U.S. must make sure it stays on the right side of that debate.  True, a robust sanctions regime has contributed to getting Iran to the table. But it is hard to imagine continuing international backing for tough measures if the U.S. and its allies don’t alter their approach as Iran shows signs of compromise. Indeed, the notion that the current level of pressure should be extended indefinitely (or even increased if some U.S. politicians ever get their way) is misguided. Now that at least a minimum level of trust has been established through direct talks among foreign ministers and the conclusion of an interim agreement, the rest of the world is now looking toward some kind of resolution.

But even setting aside political principle, it is clear that in practical terms, the hardline approach has not been quite as effective in discouraging Western business in Iran as some might have hoped. Anyone who has spent time in Tehran, even before Rouhani’s election, will have noted the apparently healthy supply of Western products, from Coca-Cola to iPhones – all a testament to the creativity of companies able to do business legally in a country under sanctions. Indeed, American companies, rather than sitting on their hands when it comes to Iran’s 70 million consumers, have been surprisingly active. They may not send official delegations but, through intermediary agents, many firms are actively seeking out investment opportunities in sectors ranging from chemicals to oil to food.

Of course, many remain sympathetic to the frustration of U.S. policymakers over the urge of companies, European and American alike, to do business with a country that they still consider a grave threat to international peace. But if things go awry, these firms will have the luxury of being able to wait for the situation to improve. Iranian businesses – and Rouhani’s government – may not be in quite so comfortable a position.

With that in mind, the U.S. should be a little more sanguine about the preparations that the private sector has been making. Rather than undercut the pressure that the West has been trying to apply, the carrot of an improved economy might create more pressure for change from within than slavish adherence to the stick.​

Cornelius Adebahr is a past fellow at AICGS and is currently an associate at the Carnegie Endowment for International Peace. This article appeared first on CNN’s Global Public Square and is reprinted here with the author’s permission.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American Institute for Contemporary German Studies.

Cornelius Adebahr

Dr. Cornelius Adebahr was a Visiting Fellow at AICGS from October to December 2013. During his fellowship, Dr. Adebahr analyzed the transatlantic partners‘ current approach toward Iran and the country’s disputed nuclear program. Following a two-year stay in Tehran, he assessed the latest openings made by Iran’s newly elected president, Ayatollah Rouhani. In addition, he looked at ways how the United States—particularly Congress—could support a potential agreement that would see a gradual phase out of the current international sanctions. Ultimately, a compromise would have to see both sides giving up some of their more extreme demands in order to settle for the common ground around their respective core interests.

Dr. Adebahr is a political scientist and entrepreneur; he lives in Washington, DC, and Berlin, Germany. Since the end of 2000, he has been the owner of Wirtschaft am Wasserturm, a political consultancy firm. Among his clients are major company-affiliated foundations as well as not-for-profit associations and European institutions. In addition, Cornelius Adebahr has been affiliated with the German Council on Foreign Relations (DGAP) since January 2006, and is currently an Associate Fellow. He is also a columnist with the Global Policy Journal published by the London School of Economics and Political Science (LSE).

As a fellow of the Stiftung Neue Verantwortung from 2009 to 2011, Dr. Adebahr headed two research teams on “geopolitics and the financial crisis” and “raw materials strategy.” He has taught at the Willy Brandt School of Public Policy at Erfurt University and the Faculty for World Studies of Tehran University. Furthermore, from 2003 to 2011, he was a member of Team Europe, an experts’ network of the European Commission.

Cornelius Adebahr was a scholar of the European Foreign and Security Policy Studies Program of the Volkswagen Foundation, Compagnia di San Paolo, and Riksbankens Jubileumsfond as well as of the Postgraduate Program in International Affairs by the Robert Bosch Foundation and the German National Merit Foundation. He studied International Relations, Philosophy, Public Law, and International Economics in Tübingen and Paris and earned his PhD at the Free University Berlin.