DAVOS, Switzerland — Iranian President Hassan Rouhani is touting Iran as a prime investment opportunity to the business people and political leaders at Davos. They're definitely willing to take a look, but it's not clear yet that anyone will be willing to buy.
Rouhani delivered the message to a packed auditorium at the World Economic Forum here, but he's also been steadily repeating it in private meetings with executives and financiers. In his closely-watched speech Thursday, Rouhani told participants to come to Iran and "witness the extensive fields for investment."
It may be years before those fields are ready for harvest, however. Tehran's interim nuclear agreement with the U.S. went into effect earlier this week, but the short-term deal eases only a few of the far-reaching sanctions that have crippled Iran's economy. The majority of the sanctions remain in place and there's no guarantee negotiators will be able to agree to terms on a broader, long-term deal that would really open up Iran's market. Rouhani even acknowledged that his plan to re-integrate Iran into the global economy faces a "long and winding and difficult road."
Many companies, especially U.S.-based ones, are waiting for an American permission slip, not an Iranian invitation. And they are going to be very hesitant to re-enter Iran until all the sanctions are lifted and the U.S. government has given them the green light. U.S. Treasury Department officials have been threatening to levy steep penalties against any company that dares go back into Iran while the measures are still in effect. On Thursday, Treasury announced a $152 million fine against a unit of German company Deutsche Borse for violating sanctions against Iran by holding securities that belonged to Iran's central bank. The conduct took place in 2007 and 2008, but -- in what is either a stunning coincidence or a deliberate warning -- Treasury decided to release the announcement on the same day Rouhani was having his Davos debutante ball.
Rouhani met privately with a group of about 35 business people Thursday afternoon to tout the potential of Iran's automobile, metals and oil sectors, according to a person who attended. He was asked by an American executive whether he could guarantee a long-term nuclear deal, according to this person. His answer was no.
The interim nuclear agreement between Iran and the United States has raised the potential that the Iranian market could open up, sparking the interest of oil companies and other potential investors. But that prospect will only become a concrete possibility if the interim deal can be transformed into a long-term one that lifts the strict U.S. sanctions that make most business with Iran impossible.
Iran's shaky relationships with some of its wealthiest neighbors could also be an impediment. Rouhani said he wanted to reopen trade with all of Iran's neighbors, or at least all the countries that Iran recognizes. Israel is not on that list. Iran also has a long-standing and increasingly bloody feud with Saudi Arabia, the biggest and richest country in the region. Two Saudi businessmen, who heard Rouhani's speech, but didn't want to be named, were skeptical that that Rouhani would have the political power to achieve his vision for Iran's economy.
His success or failure will have more to do with politics than business. Critics in Iran and the U.S. still have the potential to derail the deal. And the eagerness of some European companies to get back into Iran could drive a wedge into the already divided views of the EU and the U.S. on how sanctions should be implemented. (Not to mention the U.S. government's zeal for fining foreign companies.) Some U.S. policymakers are also still skeptical of the deal, though they're holding off on drafting new sanctions for now. Oil and gas companies like Royal Dutch Shell and Italy's Eni already angered many Obama administration officials by meeting with Iranian officials after the interim agreement was signed in November.
Rouhani's appearance in Davos represents Tehran's highest-profile effort to persuade the world's leading businesspeople to invest in Iran if or when sanctions are fully lifted. Early reactions suggested that the Iranian leader notched a clear public relations win. Actually persuading companies to return to Iran, though, will indeed be a long, winding and difficult slog.