Iran's Economy and Post-JCPOA Challenges

What are the major economic challenges in the post-JCPOA era? Are the claims of Iranian officials that Western actions to benefit Iran from the JCPOA are insufficient accurate? What solutions can be envisioned to facilitate banking and trade cooperation with Iran? These are among the questions that Mehrdad Emadi answered in an interview with Radio Farda. Mehrdad Emadi is an Iranian economist residing in Britain, who previously advised the European Union on economic matters. In recent weeks, we have heard from Iranian officials, both from the Supreme Leader and the government, expressing dissatisfaction with the inadequacy of Western actions, particularly from the U.S., in the post-JCPOA period, stating that Iran cannot benefit from the JCPOA as it should. What is your opinion on this? I believe this assessment and the reflection of these views in Tehran are not baseless. If we look at those who were involved in these discussions, observed, advised, or worked directly with the officials of the six countries' foreign ministries, their evaluation was that the return of Iran's civilian economy to global trade and access to technological and financial resources in these 12 months should have been about 27 to 35 percent higher. This refers to the amount of money or loans that should have been available. In this context, this is not whining, and if it were, I would definitely mention it. Even if you have a completely non-political and purely economic perspective, the issue raised is correct, and the movement has been very, very slow. For example, with my acquaintance from three years ago with this Boeing issue, I attribute the delays we have witnessed in the past seven or eight months mainly to the U.S. Treasury Department. I have always believed that based on my observations, the offices of Mr. John Kerry and Mr. Obama wanted this return to happen much more clearly and transparently. However, Mr. Emadi mentions that Treasury officials say there was a very high demand for license requests, and the process of addressing all these requests takes time. On the one hand, there is a perception that this is a new process and that over time, it will gain momentum. This is somewhat true, but I must remind my friends in the Treasury. If we look at the period when China and the U.S. began their economic relations, especially regarding the investments of Ford and IBM in China, there were also sanctions against China. But we see that within less than 15 months, all lights turned green, and doors opened, and it was directly reflected to non-American companies that rebuilding relations with China would not pose a risk to them. I may be mistaken, but from an outside perspective, it seems to me - which I have also told friends in the U.S. diplomatic corps - that Mr. Obama's cabinet was one side, and the Treasury was another orchestra that sometimes, in my view, was not present in the White House. It is true that the novelty of this issue brings concerns and delays, but the model of China exists, and how was it that at that time, these delays and hesitations in rebuilding relations with Beijing were not seen? A Luri proverb says, 'To get a yes once, we must bring four floors of sweets,' and this is not acceptable in terms of the framework of the agreement that both sides made. Iran has responsibilities, and if it shortens them, it will definitely have repercussions and consequences, and the same goes for the U.S. You mentioned Boeing. French officials say that the financing issue for Airbus will be resolved by advancing the Boeing contract. The U.S. Treasury official I mentioned earlier stated at the Atlantic Council that it was predictable that medium or small banks would find it easier to engage in transactions with Iran, while the situation for larger banks is more difficult. Do you think Iran did not know that such a situation would arise after the agreement? No, because it was not supposed to be like this. I was directly involved in the framework of negotiations in Europe. There was no discussion that larger banks might have more limitations or fears. What caused this fear were the very heavy penalties that, of course, were rightly imposed due to the opaque banking behavior and money laundering of banks like Barclays, HSBC, German and French banks. However, now that this agreement has been made and within the framework of this agreement, they want to get the green light that there is no problem for commercial, financial, and economic cooperation with Iran, except for two cases that are exceptions, I still believe that the Treasury did not put in as much energy as it should have to clarify that there is no problem in that framework and that the Treasury is following the same line that was confirmed in the agreement with Mr. Kerry and approved by the President of the United States. This has never been stated before that an HSBC official told me that the amount of green light that should have been shown was not shown. And large banks, since they paid most of the penalties, are fearful, but initially, there was no discussion of dual lines of red or green lights depending on the size of the banks; if there was, I would take the risk now and say that the flexibility and cooperation that Iran showed did not show at that time. Mr. Emadi, what exactly does the green light refer to here? For instance, in the case of the airplane, where this license has been granted, do you mean, for example, the use of U.S. dollars or do you have something else in mind? In this regard, three issues are raised. First, the use of the U.S. economic system and the dollar in this area. The second issue is financing and credit. We currently see that in Congress, in two cases, one by Peter Roskam and the other by Charles Bustani, they say that anyone who provides financial resources for Boeing, Congress will pursue it with the approach that this cooperation is with a country that collaborates with terrorism. In this situation, we must accept that in the U.S., there is not one State Department but three or four State Departments because the official government has confirmed it. The third issue is the direct threats that again come from Congress that if you assist in any way with this contract, the tax rate for assisting companies will double. This issue is not hidden and has been raised in the U.S. House of Representatives. If such issues do not allow the green light for cooperation with Iran, I do not know what other interpretation can be made of it. Is there a solution for this current situation? Iranian officials are constantly traveling to Europe and meeting with officials from various countries in this regard. But on the other hand, we are witnessing the upcoming presidential elections in the U.S. Yes, I believe that until the timeline you mentioned, we will witness a semi-paralysis in activating this channel. The issue is that Boeing is a large contract, and behind this contract, there are two other contracts that I cannot mention here, which friends in Congress will jump up and down about. These agreements, which the U.S. State Department has also given the green light to, will amount to $34 billion in contracts between Iranian and American companies. This is the capacity of industrial and financial companies in America that will stop this wave of limiting Iran. However, until the election results in November are clear, this opacity and duality of assessment will exist in the U.S. I think if the new U.S. president behaves reasonably and fully adheres to the agreement, then I guess American companies will return to Iran much faster than European countries because they are much further behind European companies and at that time, they will need to close the gap with their European competitors. But it is true that given the elections, everyone is waiting. My last question for you is that we have talked a lot about these external limitations and obstacles. You work in this area. Do you think that Iran's financial, banking, and economic environment is attractive enough that everything is prepared for foreign investors, and only these external limitations have slowed things down? Certainly, it is not like that. We still have issues regarding the opacity of the banking system, payments, related to the ownership of commercial and trading companies, which under the sanctions must be real private or state companies, and that other part cannot be a business partner in projects. The other issue, which is the most important, is the uniformity and flatness of the playing field, meaning that domestic companies that do not pay taxes, have private ports and airports, and these are against both the regulations of the World Trade Organization and the regulations of European Union trade. These are significant pitfalls and challenges for the return of Western, Japanese, and Korean companies without cost. Here, we have shone the flashlight on America, but I believe we have a responsibility in Iran to address each of these issues and remove these challenges from the path of foreign investors.