Iranian nuclear negotiations have been extended to next week, but some experts already are predicting the outcome -- and it's not good news for American business. Lawyers and economists interviewed by International Business Times said the nuclear agreement, which as of now will be announced July 7, would largely benefit major corporations in the European Union, but U.S. companies would not gain from the deal. In fact, they will miss out completely, at least in the short term.
Experts said EU-based companies will be able to pursue business opportunities in Iran that remain foreclosed to U.S. companies. The EU has implemented two sanction regimes against Iran, one in response to nuclear proliferation concerns and the other in response to human rights abuses. Experts say the EU will suspend most of its Iranian sanctions in the nuclear-related sanction regime, but will keep its human rights sanctions in place. (The human rights sanctions impose asset freezes on 80 individuals.)
But an internal document American law firm Latham & Watkins issued to its clients says there is “virtually no chance that all sanctions (especially U.S.) sanctions will be lifted immediately.” Lawyers told IBTimes that the U.S. would not lift its “primary” sanctions against Iran in the short term. Primary sanctions prohibit companies owned by U.S. individuals from doing business with Iran. The sanctions also restrict the transfer of U.S. regulated goods and technology to Iran, and affect all of the U.S. companies’ subsidiaries.
Individuals and companies not from the U.S., though, will be able to, at least in part, engage in trade deals with Iran that target some of the country’s most profitable sectors. Individuals outside the U.S. will be able to sell goods and services to Iran’s petroleum and petrochemical sector, as well as its shipping and automotive sectors.
That means that the easing of sanctions under the nuclear deal will initially help businesses in EU member states, not those in the U.S., lawyers say.
“Outside the spread of informational materials which promote the free flow of ideas between the countries and the sale of humanitarian goods such as most foods, medicines and medical supplies, the United States generally does not want U.S. persons to do business with Iran,” Farhad Alavi, a lawyer at Akrivis Law Group, a law firm in Washington, wrote on his personal blog. “Once you become a U.S. person you effectively have to sever business ties with Iran.”
This reality is drastically different from the one announced by the Iranian leadership in April. President Hassan Rouhani suggested that the deal on the table was one that lifted all economic sanctions on the first day of its implementation.
Experts say that U.S. multifaceted companies like General Electric are at a disadvantage in the upcoming years given that its European competitors, such as German industrial giant Siemens, are going to be able to sell goods and services in Iran, which has a massive energy sector, going forward.
“Iranians want American goods,” said Tyler Cullis, a policy associate from the National Iranian American Council, an Iranian-American nonprofit group based in Washington. The organization is known for its lobbying on behalf of the Iranian government’s interests. “The lifting of the trade embargo would create a huge commercial boom for the U.S.”
GE and Siemens are global rivals. Their businesses cover anything from turbines and power plant construction to infrastructure and medical technology. Both also are active in financial services and garner similar annual earnings. Forbes magazine has ranked GE as the world’s ninth-largest company, but has Siemens in 50th place.
“I think it is a mistake in U.S. policy,” Cullis said. “The U.S. trade embargo was put in place back in the '90s as a means to punish Iran for non-nuclear-related activities. It doesn’t make sense to have this policy in place anymore.”
Richard Sawaya, vice president of the National Foreign Trade Council, said American companies would benefit from investing in “Iran’s diversified economy." Sawaya works with USA Engage, a program that advocates ending sanctions on Iran.
In 2014, General Electric announced it was considering acquiring Alstom's power equipment business. Alstom is a French energy powerhouse, one that under new U.S. ownership would not be able to deal with Iran. GE cannot close the deal with Alstom without a nod of approval from the European Commission, which has raised concerns that the acquisition would not only lead to price hikes, but would hurt GE's competitor Siemens. The commission has until July 8 to decide about the deal, one day after the anticipated announcement of the Iranian nuclear deal.
The easing of sanctions will help countries other than the U.S., experts say, more than it will help Iran. A new report published by Roubini Global Economics says Iran will not see noticeable changes to its economy until 2016 or even 2017. Until then, Iran’s currency, the rial, will remain weak, the report said.
Congress could slow the pace of sanctions easing, though President Barack Obama still retains broad discretion to suspend or keep sanctions.
Republican leaders, the majority of whom oppose the current nuclear negotiations, are planning to force Congress to vote on a motion of approval designed to show that only a minority of lawmakers support the agreement. Sen. Bob Corker, a Republican from Tennessee, said that, at a minimum, Iran must disclose the military nature of its nuclear program and allow unconditional inspections of nuclear facilities.
Correction: "The U.S. trade embargo was put in place back in the '90s as a means to punish Iran for non-nuclear-related activities." Cullis did not say 'non-nuclear' related activities. EO 12959 and 13059, which effectuated the comprehensive trade embargo, were as much about Iran's nuclear program as anything else, according to Cullis.