Iran needs to carry out substantial and wide-ranging economic reforms, if it wants its "Look East" policy to succeed during the sanctions era, a former diplomat said.
In a recent interview with the Iranian Diplomacy website, Mohsen Roohi-Sefat said renewed US sanctions are expected to have a “profound” negative impact on Tehran’s relations with Asia’s economic powers, particularly those in the southeast of the continent, given the underlying fundamentals of their policies.
US President Donald Trump announced in May that he was breaking with European allies, Russia and China over the 2015 Iran nuclear deal, and signed an executive order reimposing broad economic sanctions, with some exemptions, on any country or company that seeks to trade with the Islamic Republic.
Iran has sought to readjust its policy to tilt closer to the East in order to circumvent and minimize the cost of sanctions.
Roohi-Sefat maintains that any assessment of the effect of sanctions on Iran’s ties with Southeast Asian countries or any proposed solution to enhance trade with them should be based on a realistic view of the ground reality.
“These countries will be influenced by the United States’ policies, as their main and ultimate objective is economic and trade development. So all their political and diplomatic ties with other nations will be overshadowed by this primary goal,” he added.
Many countries in this “strategically important” region will either cut or reduce trade ties with Iran as a result of US sanctions because their priority is to safeguard their economic interests by avoiding any clash with Washington as it may spur capital flight, according to the expert on Southeast Asian affairs.
Role of Governments
Asked if the agreements Iran signed with these nations, particularly the cooperation treaty with the Association of Southeast Asian Nations (ASEAN), will assist the country’s efforts to deepen its ties with Southeast Asia, Roohi-Sefat said they will be of little help.
“The point is whether these governments are key players in the expansion and continuation of their countries’ trade relations with Iran or not. If they were, the conclusion of such an agreement could be helpful to us. But the reality is different,” he said.
"It is actually the companies and investors that keep the economic wheel rolling in almost all countries."
The expert cited the European Union’s updated blocking statute, which aims to safeguard European firms active in Iran against US secondary sanctions, as an example of governments’ limited power to influence economic policies of firms and investors.
He was referring to the mass exodus of European companies from Iran, fearful of the extra-territorial reach of Washington’s sanctions despite the bloc’s assurances to protect them from US penalties.
Fundamental Reforms
We should take a look at the shortcomings inside the country, Roohi-Sefat said, adding that major reforms are required to give the economy a shot in the arm.
"Small- and medium-sized enterprises contribute greatly to economic growth and account for a large percentage of total employment in many countries but their significant role is underestimated and overlooked in Iran," he said.
“In addition, the failure to enforce global financial and monetary laws such as those related to FATF has become a serious obstacle to increasing trade not only with Southeast Asian countries, but also the entire world.”
Iran has been trying to implement standards set by the Financial Action Task Force, an inter-governmental organization that underpins regimes combating money laundering and terrorist financing. It hopes it will be removed from a blacklist that makes some foreign investors reluctant to deal with it.
Roohi-Sefat said there is also a need to bolster public participation in the economy to be able to resist US sanctions and improve people’s livelihood.
