A senior International Monetary Fund official expressed optimism about Iran's ability to increase global confidence in its economy, after months of international reluctance to invest and trade there despite sanctions relief from the nuclear deal.
"They are attempting to restore confidence where sanctions removal is creating opportunities," said David Lipton, the IMF's first deputy managing director, during an event on Wednesday at the Carnegie Endowment for International Peace. "They want to and are trying to open accounts with foreign banks," reported Weeklystandard.com
Businesses have been wary to invest in Iran due to US sanctions that are still in effect. Secretary of State John Kerry has been campaigning to promote investment in the Islamic Republic after Iranian complaints that the nation was not experiencing the full benefits of sanctions relief.
Lipton, who met with Iranian officials during a rare visit to Iran in May, had praised state efforts to respond to criticism from the Financial Action Task Force (FATF), an intergovernmental financial watchdog that has had Iran on its so-called blacklist. FATF temporarily suspended countermeasures against Tehran in its latest assessment of the country’s financial climate.
“The central bank is dedicated to creating an anti-money laundering, countering financing [of] terrorism supervisory regime,” Lipton said. “They have passed a counter-terrorism financing law. It’s not perfect, but it’s a start.”
Some Way to Go
He said that the Central Bank of Iran’s supervisory regime would give confidence to foreign companies looking to do business with Iran, though he did not deny that the country might still struggle in some areas.
“What the CBI is dedicated to do is to have a regime in which there will be both legal consequence and enforcement capability, to make sure that banks are not involved in [wrong activity],” Lipton said. “And that … would at least create some basis for foreign banks to have confidence that they can do due diligence about their customer and know what kinds of dealings they’re in.”
European businesses, in particular, are curious about doing business with Iran, he said.
“Europe is interested in this reintegration. European business is interested in participating,” Lipton said. “There’s a bit of a buzz about Iran right now. That doesn’t mean that people are ready to act. I think they aren’t. But I think they are ready to go and suss it out.”
The Obama administration has shown similar interest in trade with Iran, celebrating a potential deal worth billions between Chicago-based Boeing and Iran Air.
East Europe Model
Lipton said Iran faces a fundamental choice: “The Islamic Republic can stick with a largely oil-based closed economy with heavy state involvement or seek greater integration, private enterprise and foreign investment.
“The first will fail to generate employment” for Iran’s youthful population, Lipton said, while “the second can succeed but will require a transition on a scale and type countries in Eastern Europe went through” after the collapse of the Soviet Union and its hold over the Eastern Bloc.
Lipton said that while he was not sure what choice Iran would make, he and other members of the first IMF management team to visit Iran since the 1979 revolution found Iranian officials “very interested in restoring growth without rekindling inflation.”
Iran, Lipton said, needs to modernize its economic structure by reducing regulation, high tariffs and state-granted monopoly rights that are limiting competitiveness and dampening job growth.
Lipton said he talked with Iranian officials about his experiences advising Poland in the 1990s after the collapse of communism and the problems that afflicted Asian countries during a banking crisis two decades ago because of an overly intimate relationship between the banks and local governments. He said he asked an Iranian official, “Does this sound familiar?” and the Iranian, whom Lipton did not identify, “smiled and nodded his head.”
