France is taking a risky political and economic gamble in Iran


However tempting trade with Iran might look, it also involves potentially damaging risks and obstacles

After lengthy negotiations, on 7 August Renault finalised an agreement to set up a joint venture with Iranian carmakers. Under the agreement, Renault will have 60% of the shares in the new company, with 20% being held by the Iranian state company IDRO (Industrial Development and Renovation Organization of Iran) and 20% by Parto Negin Naseh, an apparently private company. The stated aim is to ramp up production of various Renault models to 150,000 units per year.

Renault is the latest in the long list of French companies to have sought business dealings with Iran in the period following the nuclear agreement (the Joint Comprehensive Plan of Action, or JCPOA) with the six global powers concluded in July 2015. At the time Hassan Rohani, head of the Iranian government, travelled to Paris with Mohammad-Reza Ne'matzadeh, his minister of Industry, Mines and Trade.

On the French side, two foreign ministers, Laurent Fabius then Jean-Marc Ayrault, and the ministers of the Economy, Transport, Foreign Trade, Agriculture and Higher Education went to Teheran.

In the business sphere, a report by Muriel Pénicaud, former head of Business France, the French international investment agency, said that executives from over 300 French firms had visited Iran since the conclusion of the nuclear agreement and over 2,000 companies had said they would be interested in working with Iranian partners.

The biggest contract was signed by the oil company Total, which took a stake of more than 50% in a $4.8-billion project to develop a gas field in the Persian Gulf. A number of other major contracts have been signed or are being negotiated, including contracts for the sale of over 100 Airbus aircraft and 40 ATR medium-haul aircraft, contracts between PSA (Peugeot-Citroën) and the Iranian groups Iran-Khodro and Saipa, a contract between Alstom and the Iranian companies IDRO and IRICO to build trainsets, and joint ventures in various other areas.

The outcome was a "235% increase in trade between Iran and France in 2016", according to Michel Sapin, then Minister of the Economy and Finance, in an interview with the Iranian daily Donyay-e Eghtesad in its issue of 4 March 2017.

Iran, with its 80 million inhabitants and a market eager to consume, comes across as a good country to do business in. But however tempting this picture might look, it also involves risks and obstacles which could counteract the processes under way and even cause harm and substantial financial loss.

First obstacle

On the international scene, the intransigence of US president Donald Trump with regard to the Iranian government, shown in the imposition of fresh sanctions, is a major drawback for potential investors. Because of the new White House policy, a reconsideration of the nuclear agreement is becoming increasingly plausible. Even if that were not the case, the almost unanimous support of both chambers of Congress for the July 2017 act imposing sanctions on the Islamic Revolutionary Guard Corps (IRGC / Pasdaran) is likely to make any dealings with Iran a high-risk enterprise, for a number of reasons.

Firstly, the law in question stops major European banks from financing transactions with Iran for fear of American reprisals.

Secondly, most Iranian firms are linked in one way or another to the Pasdaran and/or their partners and are all on the American black list.

A study on developments in economic policy in Iran carried out by the author of this article in 2015 shows how, over a 10-year period from 2005 to 2015, the Pasdaran and their accomplices gained a stranglehold on the largest Iranian firms by setting up a network of 14 economic hubs.

This means that any foreign company entering into a business relationship with Iran is involved, visibly or invisibly, in relations with the Pasdaran. The following are just a few examples.

- With its investment in the South Pars gas field in Iran, the oil company Total created a partnership with an Iranian and a Chinese company. Petropars, the Iranian company, is part of Naftiran Intertrade Company (NICO), which in turn is part of NIOC. In recent years NICO has been deeply involved in money laundering and in financing the Pasdaran's missile programme. That is why the United States placed the company on its sanctions list in 2010, 2012 and 2013.

- The Airbus consortium has sold around a hundred long- and medium-haul aircraft to Iran, even though there has been strong suspicion for several years that the entire Iranian fleet, including Iran Air's passenger aircraft, have been used to transport Pasdaran/IRGC troops, weapons and munitions from Iran to Syria.

When the first Airbus was delivered to Teheran on 13 January, the transport minister, Abbas Akhondi, said that the passengers on the first flight would be Pasdaran family members travelling on pilgrimage to the city of Machad.

- PSA (Peugeot-Citroën) has made an investment in partnership with the Iranian company Saipa, even though Saipa is part of the Bahman group, which belongs to the Pasdaran.

- K.B.C Trading Co. is the sole representative in Iran of the French pharmaceutical company Sanofi Pasteur. K.B.C Trading Co. is a subsidiary of the pharmaceutical company Barakat (Barakat Pharmed Co.), one of the most profitable companies belonging to a body called the "Execution of Imam Khomeiny's Order" (better known as Setad, or QG in Persian), which manages the profits on behalf of the Supreme Guide.

- One of the partners to the agreement with Renault concluded on 7 August is Parto Negin Naseh which, though apparently in the private sector, is in fact linked to the Pasdaran and has an extremely corrupt management. Demonstrations attracting as many as 4,000 protesters have taken place in front of the company's offices over the last three years, calling in vain for the return of their money "stolen" by its managers.

It is difficult to imagine business or other dealings in Iran without the presence of the Pasdaran throughout the entire chain.

Second obstacle

The other major problem concerns Hassan Rohani's political situation at the head of the government. A ruthless power struggle is taking place in Iran. On one side is a president with very limited powers, on the other the Supreme Guide who holds all the levers of political, security, military, financial and religious power. Even though the experience of the last 38 years shows that none of the factions among the theocratic rulers is moderate or capable of becoming so, the European Union (including France) always seems to prefer the faction headed by the president, believing it to be moderate. It is with that vision of the situation that the EU has invested in economic relations with Iran in the hope of seeing domestic and international developments moving towards a strengthening of Hassan Rohani's position.

However, that policy does not enjoy unanimous support even within the EU. It is opposed by the UK, one of the signatories of the nuclear agreement and still a member of the EU, and Poland, for example. In Iran, the policy comes up on the one hand against Iran's military intervention in Syria and the Pasdaran's de facto occupation of that country, and on the other against the continuation of Iran's ballistic missile programme. All this runs counter to France's policy in the Middle East.

Third obstacle

The rationale behind the agreements signed by French and Iranian firms is political and not just commercial. A detailed, case-by-case analysis of these deals clearly shows that the French side benefits more than the Iranian one. For political reasons, the Iranian government is pushing hard for more agreements like these in order to encourage the EU, and France in particular, to stay on its side against the United States.

If the position of Iran's rulers improves both within their own country and on the international stage, these agreements will doubtless be reconsidered. In contrast, if the theocracy's position continues to deteriorate and its confrontation with the United States to escalate, the French deals will also fall under American sanctions.

In the light of all this, French firms have shown considerable courage in doing business with Iran. But it is still a very risky gamble.

Source: Economie Matin