National Security

Corporate America stuck on the sidelines in Iran

Iran, Nuclear Deal, Centrifuges
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U.S. companies won’t be rushing in to do business in Iran, even once the terms of the landmark nuclear accord go into effect.

Lawmakers have been unable to kill the terms of the agreement on Capitol Hill, but lingering sanctions and the threat of new action will prevent the vast majority of American companies from setting up shop in Iran — even while their foreign competitors race in.

{mosads}“If you’re a U.S. company, the day after implementation day is going to look a lot like the day before implementation day,” said Richard Nephew, who worked on Iran sanctions within the Obama administration and is now a program director at Columbia University’s Center on Global Energy Policy.

“I’m really, really skeptical that any major U.S. companies are going to want to tread in that space until they are pretty sure that they’re not going to get bitten as a result of this.”

“It would be a big mistake,” agreed Sen. Bob Menendez (D-N.J.), one of the few Senate Democrats to oppose the deal, “because there’s going to be still a whole host of other sanctions that will still exist for Iran’s non-nuclear transgressions, and it is likely that we will see other sanctions come down the road.”

In fact, except for caviar, carpets and a few other specific areas, the U.S. economic relationship with Iran won’t change much at all.

The nuclear deal lifts sanctions on Iran’s oil and financial sectors in exchange for limits on its ability to build a nuclear bomb.

The vast majority of U.S. sanctions, however, will only be lifted on foreign companies — not American firms.

“We are not removing our trade embargo on Iran,” a senior administration official said in a recent briefing with reporters. “U.S. persons and banks will still be generally prohibited from all dealings with Iranian companies, including investing in Iran [and] facilitating cleared country trade with Iran.”

However, there are a few exceptions. 

Once regulators certify that Iran has taken a number of steps to shut down its nuclear program — which won’t happen for a few months — some industries will have a small amount of flexibility.

The most notable is civilian aircraft materials, of which Iran is in desperate need.

 The U.S., in return, will allow imports of Iranian carpets and foodstuffs including caviar and pistachios. Those shipments serve a symbolic purpose but aren’t likely to have a transformational effect on the Iranian economy, analysts said.

Some foreign subsidiaries of U.S. companies can also begin doing business in Iran. The Obama administration has yet to signify exactly what types of activities might be allowed, though, so it remains to be seen how overseas subsidiaries will respond.

In any case, corporate America doesn’t appear to be chomping at the bit to rush in to Iran, which may be in part due to the threat of new sanctions from Congress.

Opponents of the Iranian nuclear deal on Capitol Hill have so far failed in their bid to block it and are now turning to other avenues to undermine the agreement. 

Meanwhile, as GOP presidential candidates are quick to remind people, the terms of the deal could be abandoned with the stroke of a pen from the next resident of the White House.

Those comments might cause 

businesses to be wary of investing heavily in a legal opening that could close in just 16 months. 

Europeans, meanwhile, have a different story to tell.

While many American firms will be on the outside looking in at Iran, the deal will lift most United Nations and European Union sanctions on Iran, which could open the floodgates for foreign firms.

“The bottom line is U.S. companies and U.S. persons will be more constrained, because we will have what is essentially a unilateral, U.S.-only embargo,” said William McGlone, a partner at the Latham & Watkins law firm who specializes in export controls and sanctions.

Some jostling has already begun.

“There are huge trade delegations over there,” said Sen. John McCain (R-Ariz.), who leads the Senate Armed Services Committee and is strongly opposed to the deal.

“There’s not an empty hotel room in Tehran.”

The main target of that foreign activity is likely to be energy, though the degree to which American firms get in on the game remains a question mark. 

Federal analysts say the country has up to 30 million barrels of oil in storage and could grow its production by up to  700,000 barrels a day once sanctions are lifted. 

Iran’s oil minister said in May that “we will witness involvement” of American firms once that happens, but even companies bullish on the prospects aren’t moving quickly to confirm their involvement. 

Royal Dutch Shell told The Hill in May that the company is “interested in exploring the role Shell can play in developing Iran’s energy potential,” but a spokesman Wednesday said only that that position still stands. 

Sen. Bill Cassidy (R-La.), a member of the Senate Energy and Natural Resources Committee, said he doesn’t expect many U.S. companies to join the parade to Iran, citing uncertainty about the stability of the country’s legal system and its lax environmental regulations. 

But other countries, Cassidy predicted, are ready to move in when they can. 

“The Chinese are going to be the ones who benefit the most in terms of trade, and then the Russians and then the Germans,” he said. “I don’t think the American companies would be anywhere close to it.”

“This is an incredible deal — if you’re in another country, starting with Iran.”

Tags Bob Menendez John McCain

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