“Chance of a Century”: International investors flock to Tehran to boost regime

January 05, 2014

Iranian FM Zarif embraces French FM Laurent in Geneva

 

* Following the Obama/Kerry/Ashton deal with the Iranian regime, sanctions start to collapse, while Iran nears the final stages of building a nuclear bomb. Years of carefully built up pressure against Tehran collapses overnight.

* Der Spiegel magazine: “Airplanes to Iran are now full of Italians, including managers from Italian energy company Eni. France is also on the move. In a deal worth billions, the French are about to renew their licensing contract for supplying Peugeot components to Iranian car-maker Iran Khodro. And the Americans are there with ExxonMobil, Chevron Corporation and other companies. They are responsible for renovating the old oil production facilities and refinery industry, as well as exploring new oil fields. That’s a huge multibillion-euro business.”

* Tom Gross (as quoted in today’s Jerusalem Post): “The rush by Western companies and diplomats back into Iran is extremely disconcerting, and highly dangerous. The despotic Iranian regime – which already executes more people than any other government in the world apart from China – will feel even more emboldened to continue its clampdown on liberals, reformers and human rights activists and its persecution of minorities such as the Baha’i, Baluchis and homosexuals.”

* Gerald Steinberg: “The claims made by President Obama and European leaders to the effect that they can simply restore sanctions whenever the Iranian leaders resume production of nuclear weapons looks increasingly hollow.”

 

CONTENTS

1. Financial Times: Iran is the “must-visit” destination for 2014
2. “Has the Geneva agreement undercut sanctions to stop Iran’s nuclear program?” (By Benjamin Weinthal, Jerusalem Post, Jan. 5, 2014)
3. “Chance of a century: International investors flock to Tehran” (By Susanne Koelbl, Der Spiegel, Jan. 2, 2014)


FINANCIAL TIMES: IRAN IS THE “MUST-VISIT” DESTINATION FOR 2014

[Note by Tom Gross]

This is the latest in a serious of dispatches on the Iranian nuclear program. Iran now has over 19,000 centrifuges and counting.

I attach two articles below, from today’s Jerusalem Post and from the German magazine Der Spiegel.

Meanwhile – without dismantling a single centrifuge – the Iranian regime seems to be back in the good books of many in the West.

This weekend’s Financial Times – a paper some of whose writers constantly find fault with the Middle East’s only democracy, Israel, while being soft on Arab and Iranian tyrants – lists Iran as the “Top 2014 travel destination” on its “must-visit” list for 2014.

 

* You can comment on this dispatch here: www.facebook.com/TomGrossMedia. Please also press “Like” on that page.

***

Among other recent dispatches on this subject:

* Why does John Kerry refer to the Ayatollah as “Supreme Leader?” (Dec. 3, 2013)

* “This is only the first sip, the first foretaste of a bitter cup” (Nov. 24, 2013)


THE FLOODGATES OPEN

Analysis: Has the Geneva agreement undercut sanctions to stop Iran’s nuclear program?
By Benjamin Weinthal, Europe correspondent
The Jerusalem Post
January 5, 2014

www.jpost.com/Middle-East/Has-the-Geneva-agreement-undercut-sanctions-to-stop-Irans-nuclear-program-337098

BERLIN – The interim nuclear deal reached between the major powers and the Islamic Republic on November 24 opened the investment floodgates for Western companies seeking to capitalize on a new business environment in Iran. Just in the first week of 2014 – before the slated late January implementation of the interim agreement – a series of articles capture the mad dash to jump-start business with Iran.

Finding Geneva a hard sell, in no small measure because Israel and US’s Arab allies in the Gulf see gaping holes in the sanctions relief provided to Tehran, a range of Middle East experts voiced new warnings on Sunday in the course of interviews with The Jerusalem Post. Avarice-driven conduct by Western businesses will help Tehran develop a nuclear weapon and repress its population’s human rights, according to experts.

Prof. Gerald M. Steinberg, a political scientist at Bar-Ilan University, said, “After Geneva, and without any significant change in Iranian behavior, the gold rush is on to resume business as usual.”

“The claims made by President Obama and European leaders to the effect that they can simply restore sanctions whenever the Iranian leaders resume production of nuclear weapons looks increasingly hollow.”

He added, “If the sanctions continue to unravel, the last resort for stopping Iran is a military operation that Israel, the US and Europe have long sought to avoid.”

Der Spiegel magazine addressed the breakdown in the anti-Iran business atmosphere, headlining its article: “Chance of a Century: International Investors Flock to Tehran.”

Daniel Bernbeck, head of the German-Iranian Chamber of Industry and Commerce in Tehran, told Der Spiegel that airplanes to Iran are “full of Italians,” which includes managers from Italian energy company Eni S.p.A.

Der Spiegel noted, “France is also on the move. In a deal worth billions, the French are about to renew their licensing contract for supplying Peugeot components to Iranian car-maker Iran Khodro.

“And the Americans are already here with ExxonMobil, Chevron Corporation and other US companies,” Bernbeck said. “They are responsible for renovating the old oil production facilities and refinery industry, as well as exploring new oil fields. That’s a huge multibillion-euro business.”

Bernbeck triggered controversy in 2009 with his energetic efforts to attract business to Iran at the expense of human rights. After Iran’s regime allegedly doctored the results of the 2009 presidential election, Bernbeck said he saw “no moral question here at all” in engaging in business deals during the wave of anti-democratic repression.

Canadian MP and former justice minister Irwin Cotler slammed Bernbeck at the time, saying an “important role for civil society is to hold the Daniel Bernbecks to account.”

Tom Gross, a Middle East expert, told the Post, “The rush by Western companies and diplomats back into Iran is extremely disconcerting, and highly dangerous,” adding, “The despotic Iranian regime – which already executes more people than any other government in the world apart from China – will feel even more emboldened to continue its clampdown on liberals, reformers and human rights activists and its persecution of minorities such as the Baha’i, Baluchis and homosexuals.”

The flaws in the Iran agreement have come under great scrutiny in the US.

Michael Doran, a senior fellow at the Saban Center for Middle East Policy at the Brookings Institution, told the Post, “The idea that the United States could turn on and off the flow of investment to Iran like a spigot was always fanciful. It has sent a clear message that doing business with Iran is now legitimate, and that Tehran and Washington are on a path to improved relations. In doing so it has created an influential economic lobby in the West dedicated to ensuring that the Americans and Iranians remain on that path. The sanctions regime is not dead, but it is damaged.”

In Israel, experts expressed growing frustration and disappointment with the international community’s failure to confront Iran.

Tommy Steiner, a senior research fellow at the Institute for Policy and Strategy at the Interdisciplinary Center Herzliya, told the Post, “The flocking of European and American executives to try and position themselves for making business with Iran in anticipation of additional sanctions relief undercuts the negotiating posture of the US and the EU in the next round of negotiations.

Iranian negotiators might misinterpret the executives’ ‘charm offensive’ and wrongly assume that the soon relief of sanctions is a done deal and that they are not compelled to rollback and dismantle their nuclear program.”

Steiner, a leading expert on Israel-EU relations, added, “While one cannot forbid the travel of Western executives to Iran, US and European governments ought to reach out to these companies and explain to them that their eagerness to do business with Iran might cause misperceptions and undermine the diplomatic efforts. In that case, the Western executives will contribute to an escalating crisis with Iran rather than developing new business opportunities.”

Emmanuel Navon, director of the communications and political science department at Jerusalem Orthodox College, told the Post he is “not surprised” that Western companies are rushing into Iran. The Geneva deal sent a message to loosen sanctions.

“Many of the companies are technically breaking the embargo [against Iran], but because of the atmosphere no one in the West is willing to enforce the sanctions 100 percent,” he said. Navon sees Western business “taking advantage of the interim deal” and the West giving Tehran a free pass.

Steinberg said, “This is exactly what Prime Minister Netanyahu warned about after last month’s breakthrough in the Geneva talks with Iran. It took more than a decade to build up serious economic sanctions after the IAEA documented Iran’s illicit nuclear weapons program, but they were finally exerting pressure on the regime in Tehran.”

With Iran securing as much as $20 billion in sanctions relief, the interim agreement may have erred on the side of providing Iran with a heavy dose of carrots.

This method is likely to undercut the world power’s original aim, namely, the use of both carrots and sticks to stop Iran’s nuclear program.

 

WESTERN COMPANIES ARE GEARING UP DO BIG BUSINESS

‘Chance of a century’: International investors flock to Tehran
By Susanne Koelbl
(Translated from the German)
Der Spiegel
January 2, 2014

www.spiegel.de/international/world/geneva-deal-sparks-new-international-investor-interest-in-iran-a-940629.html

Since the West reached a landmark deal with Iran on its controversial nuclear program late last year, many Iranians are hoping for an end to sanctions. Western companies are also gearing up do big business.

Daniel Bernbeck has learned that in Tehran there’s no point getting worked up about things like the gridlock between Gholhak, his neighborhood in the northern part of the city, and downtown, where his office is located. Here he is again, stuck in traffic, with everyone honking their horns. Tehran is a murderous city, says Bernbeck, even without international sanctions and threats of attack from Israel.

Bernbeck is sitting in a gray SUV. He’s a wiry, tall blond man who wears lawyer-like glasses. The only departure from the standard business look is a narrow soul patch on his chin, which suggests a certain degree of individualism. His cell phone rings. Bernbeck’s Iranian secretary is on the line. She’s expecting him, and the deputy German ambassador has also arrived, along with two investment bankers from London and Hong Kong. They are asking about stock tips for Iran.

“Iranian stocks for Hong Kong?” Bernbeck exclaims with a grin, and then says in his best Farsi: “The same bankers would have said a year ago: You’re crazy.” Then he asks the driver to hurry up, although it doesn’t do any good.

Bernbeck is the head of the German-Iranian Chamber of Industry and Commerce in Tehran. He paves the way for business ties in a country where Western politicians have been trying for decades to make such relationships impossible, especially since 2006.

At the time, the Islamic Republic started to rapidly expand its nuclear program.

Intelligence agencies predicted that it would be only a matter of a few years before the Iranians had a nuclear bomb. Arab Gulf states in the region felt threatened, and Israel was determined to go to war with Tehran if a political solution could not be found quickly.

For over five years now, Bernbeck, 50, has been living between these two adversarial worlds, more specifically “on the dark side of Mars, where the cannibals and Holocaust deniers live.” Bernbeck says that’s how Iran is portrayed in the West.

LANDMARK DEAL IN GENEVA

But his world has become much brighter since Nov. 24. That was the day when the five permanent members of the UN Security Council -- plus Germany and Iran -- signed a landmark deal in Geneva aimed at turning around the situation within the next six months. According to this agreement, Iran would roll back certain elements of its nuclear program and, in exchange, the West would ease economic sanctions.

Bernbeck believes in this possibility for a peace accord. Suddenly it appears to be there, the “chance of a century” that he has been waiting for, although this opportunity could still be dashed, like in 2005.

Back then, Iran only had a few centrifuges for enriching uranium, and negotiators were close to reaching an agreement that would have frozen its nuclear program at that level. But then the negotiations faltered and US President George W. Bush refused the deal.

Today, eight years later, Iran has over 19,000 centrifuges. So why should things work out now? Perhaps because this time both sides have made concessions on the issue. The Americans have dropped their absolute demand that the Iranians abandon their entire nuclear program. At the same time, Israel’s threats of war and, above all, painful international sanctions have forced the Iranians back to the negotiating table.

For the past three years, there have been virtually no bank transfers between Iran and the outside world, and revenues from oil and gas sales have plummeted. Only the Chinese are still making purchases, but instead of paying in hard currency they are delivering only bulldozers and construction machinery.

OLD REVOLUTIONARIES ARE SKEPTICAL

The sanctions have paralyzed Iran’s economy. But Mohammed Hossein Rafi is one of the many Iranians who simply don’t believe that. In fact, he says, the sanctions have only served to make his proud country even stronger.

Rafi ranks among the country’s conservatives, the hardliners, the old faithful followers of Ayatollah Khomeini. He is sitting in the Iranian Artists’ Cafe, and like most former revolutionaries, he wears his beard neatly trimmed around the chin. He keeps his cashmere coat on during the interview.

During the 1970s, he campaigned against the Shah, then fought in the Iraq-Iran war, and later had a long career with an Iranian intelligence agency. Now he is supposedly working at an institute for Islamic standards, which wants to create something akin to Germany’s DIN industrial standards.

Rafi says that with the international pressure Iran has risen to become a leading country in the area of science and research. It has even discovered an effective AIDS drug, which will soon be presented to the world, he contends.

These are just some of the stories that war veterans recount in Tehran. The old revolutionaries take a highly skeptical view of the negotiations with their arch-enemy, the United States. They would prefer to see the negotiators fail. And the Revolutionary Guards’ network, which was founded by Ayatollah Khomeini -- and includes Rafi -- still remains one of the most powerful organizations in Iran.

Rafi says that he doesn’t believe in peace or the current nuclear negotiations: “Obama wants war,” he says. Rafi maintains that 50,000 volunteers have already registered as suicide bombers, to be deployed if it should come to an armed conflict. But he refuses to divulge the identity of the organization that has recruited them.

Iran’s new president, Hassan Rohani -- who the West is hoping has the strength to institute reforms -- will have to incorporate people like Rafi into his new Persia. Indeed, Rohani says that there should be no more “revolutions,” but rather an “evolutionary process.” It might be possible to win over the war veterans if they can benefit from future business deals, Bernbeck says.

INVESTORS FLOCK TO TEHRAN

Rohani needs economic success stories. He has to sweep aside the sanctions but, more importantly, move faster than inflation, which is eating away at the already meager income earned by millions of Iranians. The monthly minimum wage is only €140 ($190).

Iranians are suffering under the embargo, and they are not just holding the Americans responsible for this. The price of gasoline has multiplied; milk and cheese now cost three times as much as they did two years ago.

But it looks like the nuclear negotiations could spark an economic upswing in Iran. Although none of the sanctions have been lifted, droves of Western business people are already flocking to Tehran. Iran has the world’s fourth-largest known oil reserves, and the second-largest gas reserves. Business deals worth billions of euros can be made here.

Bernbeck has finally arrived at the underground parking garage. He takes the elevator to the seventh floor, which is the home of the German-Iranian Chamber of Industry and Commerce. He lists the names of all the countries whose business people have already been here -- “except for the Germans again.”

Bernbeck tells a story that he thinks perfectly illustrates the current situation in Tehran: Not a single top European official came to President Rohani’s inauguration, as agreed by the EU member states’ representatives in Brussels. But the very next day the government in Rome sent a high-ranking emissary to personally congratulate the new Iranian head of state.

Now the planes from Europe are “full of Italians,” Bernbeck quips, including managers from Italian energy giant Eni. France is also on the move. In a deal worth billions, the French are about to renew their licensing contract for supplying Peugeot conponents to Iranian carmaker Iran Khodro. “And the Americans are already here with ExxonMobil, Chevron Corporation and other US companies,” he says, adding: “They are responsible for renovating the old oil production facilities and refinery industry, as well as exploring new oil fields. That’s a huge multibillion-euro business.”

CULTURE SHOCK

Bernbeck falls silent for a moment, but on his face one can read the disbelief of a man who is not only exhausted from the traffic of this megacity, but also from the political games of the other Western nations in Tehran. In front of his office door, he swings around again and says: “This here is not a matter of good and evil, or perhaps even the nuclear deal. It’s really about a great deal of money.”

“Salam, khub hastid, khoshhalam,” Bernbeck greets a number of board members from the chamber of commerce who have been waiting for him. He bows slightly and places his right hand over his heart. Bernbeck knows Iran. As the oldest son of a Protestant priest, he grew up in Tehran in the 1970s. He experienced the oil boom under Mohammad Reza Shah Pahlavi. A few years later, he asked the Shah of Iran’s daughter Farahnas for a dance after a day of skiing at a fancy resort in the mountains north of Tehran.

Then came the revolution in 1979, and the fledgling Islamic Republic made many of his childhood friends into Revolutionary Guards, who wore uniforms and sped through the streets in all-terrain vehicles. During the Iraq-Iran war in 1981, when blackouts were ordered throughout the city and the power was turned off, Bernbeck sat in the basement of the parsonage in the district of Gholhak, and played rummy together with his parents and siblings.

Today he speaks Farsi almost as well as he speaks German, and he hears the difference between t’aarof and the truth. T’aarof is a term that covers a broad range of polite etiquette that doesn’t necessarily have to reflect reality. Westerners are often driven to despair by t’aarof, because they think they understand the content of the message.

When Bernbeck returned to Iran 26 years after spending his formative years there, he also had to deal with culture shock. The chamber of commerce was mired in the corrupt undertow of an Iranian mafia-like network before he took charge. Now Bernbeck is endeavoring to establish his notions of “transparency and truthfulness.” Of course, it’s not always easy.

Only recently one of his employees slipped him another one of those ubiquitous envelopes. It contained a heavy gold coin -- a bribery attempt. Bernbeck was asked to go to special lengths for a certain individual. But he personally returned the gold coin to the sender. “Send me flowers, cake, but nothing worth more than 100,000 toman,” he said (100,000 toman is the equivalent of roughly €30).

RESPECT MORE IMPORTANT THAN PEACE

As someone who understands both worlds, Bernbeck has no problems imagining how the West came close to war with Iran. He says it has to do with a chain of observations, each of which is coherent in its own right, yet not necessarily understood by the other side.

An angry radical like former Iranian President Mahmoud Ahmadinejad could only be elected because he represented the will for independence -- even if he spent billions on the nuclear program, ruined the economy and perhaps even endangered world peace. The Iranians thought that he would win back respect for their country, says Bernbeck. For many Iranians, respect is more important than peace.

Bernbeck packs his briefcase and puts on his winter coat. He wants to make an official visit to the new president of the Iranian Chamber of Industry and Commerce, where representatives of business organizations from around the world are standing in line.

On Vali-e Asr, the most prestigious avenue in the capital city, he gazes at a young couple. The two are walking hand in hand, and the girl’s headscarf is only barely covering her hair in a halfhearted attempt to comply with the law. She is wearing black eyeliner and bright red lipstick. Behind the couple is a group of young, pious women dressed in black full-body hijabs that don’t reveal a single lock of hair.

Looking at the couple, Bernbeck says that Iran has become a divided nation. Many Iranians long for freedom and individuality -- and their dreamland is the United States, he contends. The others still shout the same old hostile slogans -- like “death to America” -- after Friday prayers.

GERMAN INTEREST COMES LATE

President Rohani would like to move his country forward economically, but he is hardly capable of easing the strict rules that govern Iranian society. The young woman wearing makeup can expect to be disciplined by the guardians of public morals. Bernbeck spreads out his hands like a horn of plenty. He says that the economy could perhaps change the country. But can money and prosperity also bring liberalization?

Since the beginning of Rohani’s presidency, the pressure on young people has been even greater than at the end of Ahmadinejad’s term in office. Private parties are raided by the guardians of public morals, websites are shut down, and the sites’ operators are thrown in jail. An increasing number of prisoners sentenced to death row are hanged from construction cranes in the city streets.

The young people are going underground, literally. Many parties, concerts and art show openings are held in cellars, because it is cheaper and organizers are afraid of being persecuted.

“They play with us, get our hopes up and waste our time,” says Gelareh Sheibani, “and I don’t have that much time.” She is 28, making her old enough to recall the enormous expectations that she pinned on earlier so-called attempts at reform, which ultimately failed. And now the hardliners in the country intend to show Rohani once again that they still call the shots.

Sheibani’s dark hair falls down to her hips. She is sitting on a large velour armchair in a small recording studio in downtown Tehran basement. She is not wearing any jewelry, but she does wear eggplant-colored nail polish.

Sheibani is a singer. But solo singing by women is forbidden in Iran because it has an “erotic” effect on men, according to clerics. Nevertheless, she has launched her professional career and now regularly performs abroad.

Bernbeck rolls with his SUV into the garage of his home in Gholhak. With all the foreign delegations in Tehran he has to work late these days, and his three children are already in bed. Bernbeck checks his emails and discovers another three requests for information from Germany: What are the labeling requirements for energy drinks in Iran? How can I organize a pasta sales network? And, last but not least, please compile an analysis of merchant marine jobs on the Iranian coast.

The Germans are arriving late, but they are coming after all.

All notes and summaries copyright © Tom Gross. All rights reserved.