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Opinion
June 2, 2017 www.intellinews.com I Page 21
ALACO DISPATCHES:
Re-empowered Rouhani still faces struggle
to woo investors
Tom Laub of Alaco
Western investors will have been encouraged by the re-election of reform-minded Hassan Rouhani as Iran’s president, but Iran’s powerful hardline forces will likely frustrate efforts to make the country more attractive for foreign investment.
Rouhani’s clear victory over conservative rival Ebrahim Raisi is widely seen as public backing
for his competent management of the economy and engagement with the West following the 2015 nuclear deal. Although investors have been slow in coming, oil exports have surged, enabling Rou- hani to point to significant economic progress. In the year to March 2017 Iran’s GDP grew by around 6.5%, its current account surplus rose to around 6% of GDP over the same period, and inflation has tumbled from a 2013 high of 45% to 7%.
During his re-election campaign Rouhani sought to appeal to voters by pledging to lift remaining US sanctions, step up anti-corruption efforts.
and increase trade. He secured 57% of the vote, 6 percentage points more than his share in 2013, by urging the electorate to choose “the path of inter- action with the world, away from extremes”.
The message appealed to Iranians keen to put the impoverishment of international isolation behind them. Yet even with his considerable popular mandate, it seems that Rouhani is unlikely to dislodge the main barriers to foreign investment, central to the country’s future prosperity.
Iran’s entrenched power structure means that President Hassan Rouhani is unlikely to be able to persuade the hardliners to change their ways.
One of investors’ principal concerns in advance of last week’s elections was that a victory for Raisi would encourage conservative hardliners to un- dermine the nuclear agreement, which they argue has failed to deliver the economic windfall Rou- hani promised. But while fears about the demise of the accord may have been allayed for now, the president will find it hard to fulfil his campaign pledges to lift American sanctions.
This is because one of their main targets is the country’s arch-conservatives, the Iranian Revolu- tionary Guards Corps (IRGC), the elite and domi- nant branch of the security forces, which exerts considerable influence over the economy.
The US measures coupled with uncertainty about American sanctions policy on Iran have meant that Western investment has been thin on the ground since the removal of nuclear-related measures 18 months ago. There have been a few exceptions, notably deals with Airbus, Boeing and French car producers.
Investor nervousness is understandable. The risk of breaching US sanctions – which include meas- ures linked to human rights violations, ballistic missiles and fomenting regional instability – are a big deterrent. In March a $1.2bn fine was imposed on the Chinese telecommunications group ZTE for exporting US-produced components to Iran and North Korea.