Across Europe, businessmen pack conference halls to discover how to unlock Iran’s vast potential after the lifting of sanctions.
Four hundred of them piled into a Swiss hotel in Zurich on August 27th for a day of briefings. Others are filling the flights to Iran. Austria’s president is planning to take 240 businessmen with him when he visits later this month.
“Welcome to a country with the population of Turkey, the size of western Europe with the world’s largest reserves of gas,” gushed a speaker at the Zurich event.
Not only would they enjoy access to Iran’s 80 million people, but to a hub for trading with hundreds of millions more in Iran’s troubled neighbors, wrote the Economist.
Tehran Stock Exchange, which rallied after the interim nuclear deal in Lausanne, Switzerland in April, stuttered and fell after the final one in Vienna in July. Businessmen there moan of unshiftable inventories and sharply overdrawn balance-sheets. Property prices and construction are flat.
Sanctions have indeed created pent-up demand, but they have also dried up the liquidity needed to finance it. The price-tags delegates place on Iran’s needs—$15 billion for its railroads, $200 billion for its energy sector, $30 billion for tourism—look exciting, but paying for them is a different matter. Oil prices are down by half, sharply reducing revenues as well as the incentives to invest when reopening happens.
Financial experts insist that President Hassan Rouhani remains on track to privatize state monopolies, which dominate the economy. The president has sharply squeezed the money supply to cut inflation. Western ministers travel back and forth to Tehran but no one yet knows when bank transfers will do the same. Some wonder whether the “Resistance Economy” could herald a new bout of protectionism.
Sanctions relief should release $50 billion-120 billion (estimates vary wildly) of Iranian assets frozen abroad. Repatriation from the diaspora might add $20 billion more. Mercedes and Volkswagen are said to be gearing up to replace Peugeot, which once ranked Iran as its second largest market, until sanctions forced its withdrawal. Coca-Cola is planning a major expansion in 2016.
American grain exporters, who are already Iran’s largest supplier of wheat, munched merrily at the Zurich lunch. Politicians and businessmen again speak excitedly of the Persian Gulf. But the reality is that the Iranian phoenix may take some time yet to become airborne.
