As most followers of geopolitical issues know, on 14 July 2015 the so-called E3/EU+3 (China, France, Germany, the Russian Federation, the United Kingdom and the United States, with the High Representative of the European Union for Foreign Affairs and Security Policy) and the Islamic Republic of Iran signed the Joint Comprehensive Plan of Action ("JCPOA"), which provides for the lifting of a wide range of economic and other sanctions against Iran in return for Iran agreeing to take certain steps to reduce and degrade its nuclear industry. The actions required by Iran were quickly implement and verified by the International Atomic Energy Agency (an independent agency created by international treaty and which reports to the United Nations General Assembly and Security Council). As a result, the sanctions relief outlined in the JCPOA were implemented on 16 January 2016 ("Implementation Day").
Although considered by many to be a success from a diplomatic and security perspective (of course, there are voices that disagree with that conclusion), the global business community was also excited to enter into the Iranian market without the threat of sanctions (enforced mostly by the U.S. and the E.U). Such excitement was justified based on the size of the Iranian market - nearly 90 million people, many of whom are well educated in areas of businesses, engineering, etc., and a wide range of industries that are in dire need of equipment upgrades and investment from the outside world.
However, that initial excitement turned to caution when it became known that, unlike the E.U. and the U.N. sanctions relief, the U.S. sanctions relief agreed to in the JCPOA was very limited. In fact, a wide range of U.S. sanctions still apply. Some of those remaining sanctions are the same sanctions that might apply with respect to any country, such as the restriction against doing business with persons on the SDN List (i.e., the Specially Designated Nationals and Blocked Persons list sometimes referred to as the "bad guy" list which precludes business transactions with known or suspected terrorists, money launderers, etc.). However, there are also a large number of so-called "non-nuclear" related sanctions which limit doing business with Iran because of Iran's support for terrorism, human rights violations, etc. Prior to Implementation Day, such non-nuclear sanctions were enforced by the U.S. on a global basis. After Implementation Day, those sanctions are now only enforced against U.S. Persons.
So, although there are several U.S. sanctions that apply globally after Implementation Day, including sanctions that make it hard conduct business in Iran in U.S. Dollars, the most significant U.S. sanctions remaining in place after Implementation Day are those that largely prohibit U.S Persons (i.e., U.S. Citizens and green card holders and U.S businesses) from doing business in Iran or with Iranian businesses or residents. That's right - the U.S. negotiated for many, many years to get agreement on the JCPOA and the lifting of Iranian sanctions and the U.S. has intentionally prohibited U.S. businesses from seeking opportunities in the huge Iranian market. Effectively, the U.S. government spent significant time and effort to get to an agreement that gives away the Iranian market to non-U.S. businesses.
At first, many U.S. businesses were shocked that, except for previous exceptions for food and medicine and the new exception for passenger aircraft, they were not going to be able to pursue projects in Iran following Implementation Day. The arguments for the continue enforcement of the various sanctions (which are part legislative and part from executive orders) are several. Let's review some of those arguments.
One, that Iran continues to support terrorism and abuses human rights. It is often repeated that Iran is the largest sponsor of terrorism in the world. Unfortunately, such arguments are typically made by uninformed people. The reality is that Iran is no more, and certainly less of, a supporter of terrorism than many other countries in the region. Iran certainly does not have a tradition of Jihad whereby it sends militants to attack U.S. interests. Certainly, Iran's activities can't compare to the negative impact of the multi-decade effort by other Middle East powers in to spread extreme religious and cultural thinking by way of funding and controlling schools, mosques, militants and other institutions. And, Iran's human rights story, while not laudable, is no worse than many other countries, which are often stated to be a U.S. "friend" or "ally".
Two, that Iran is a totalitarian state with no respect for democracy. There are very few other Islamic-majority countries in the Middle East that have any aspect of democracy. But, just on 26 February 2016, Iran had elections for its national and local representatives. Although those elections are flawed in many respects, they do result in some degree of popular representation, something few other countries in the region can say. And, in this case, it is generally considered that the "moderates" made significant advances in the election.
Three, Iran is a threat to the U.S. ally of Israel. This tired argument misses the point that many other countries in the region have actually had wars with Israel, but Iran never has participated in those wars. And, the U.S. commitment to the defense of Israel is so unqualified that any attack on Israel would be suicide by Iran. Not going to happen.
There are other arguments, but they also have little foundation in reality or history and can largely be rebutted, including by noting that U.S. companies are allowed to do business in many countries that actually conduct the activities that are attributed to Iran. Perhaps more important, there are many arguments that would support a U.S. policy of business engagement with Iran.
First, everyone who has any actual knowledge of Iran knows that the Iranian people are big proponents of doing business with Americans. My personal experience with regular Iranians and every person I've known who has visited Iran comes away with stories of how hospitable the Iranian people are and how much they say they love America and Americans. To not allow U.S. businesses to operate in Iran risks diminishing the positive attitude that Iranians have of Americans and America.
Second, allowing U.S. businesses to be present in Iran and engage with more Americans can only increase the positive view of the U.S. inside Iran. In fact, the hardliners in Iran are quite happy that the U.S. is preventing most U.S. companies from doing business in Iran because they are very concerned that the image of the U.S. is a threat to the hardliners' control of various aspects of Iranian life, many businesses in Iran and the overall propaganda effort that the U.S. and Americans are the Great Satan.
Third, without any U.S. engagement in Iran, the U.S. government will have almost no access to first-hand knowledge of what is happening in Iran.
Fourth, the European and Chinese companies will excel in Iran without U.S. competition, leading to the strengthening of the non-U.S. companies and the loss of jobs and income in the U.S.
In summary, the arguments against allowing U.S. companies to do business in Iran are weak, at best, and certainly are illogical given how the U.S. doesn't have such restrictions for doing business in other countries whose actions are much worse by comparison. And, there are many strong policy arguments to allow U.S. companies to do business in Iran. Congress does not seem to have the sense or the will to make the right decision on this. U.S. business interests need to join efforts to pressure Congress and the president to change the law and eliminate most of the remaining sanctions so that U.S. business competitiveness and U.S. jobs are a priority.
Although considered by many to be a success from a diplomatic and security perspective (of course, there are voices that disagree with that conclusion), the global business community was also excited to enter into the Iranian market without the threat of sanctions (enforced mostly by the U.S. and the E.U). Such excitement was justified based on the size of the Iranian market - nearly 90 million people, many of whom are well educated in areas of businesses, engineering, etc., and a wide range of industries that are in dire need of equipment upgrades and investment from the outside world.
However, that initial excitement turned to caution when it became known that, unlike the E.U. and the U.N. sanctions relief, the U.S. sanctions relief agreed to in the JCPOA was very limited. In fact, a wide range of U.S. sanctions still apply. Some of those remaining sanctions are the same sanctions that might apply with respect to any country, such as the restriction against doing business with persons on the SDN List (i.e., the Specially Designated Nationals and Blocked Persons list sometimes referred to as the "bad guy" list which precludes business transactions with known or suspected terrorists, money launderers, etc.). However, there are also a large number of so-called "non-nuclear" related sanctions which limit doing business with Iran because of Iran's support for terrorism, human rights violations, etc. Prior to Implementation Day, such non-nuclear sanctions were enforced by the U.S. on a global basis. After Implementation Day, those sanctions are now only enforced against U.S. Persons.
So, although there are several U.S. sanctions that apply globally after Implementation Day, including sanctions that make it hard conduct business in Iran in U.S. Dollars, the most significant U.S. sanctions remaining in place after Implementation Day are those that largely prohibit U.S Persons (i.e., U.S. Citizens and green card holders and U.S businesses) from doing business in Iran or with Iranian businesses or residents. That's right - the U.S. negotiated for many, many years to get agreement on the JCPOA and the lifting of Iranian sanctions and the U.S. has intentionally prohibited U.S. businesses from seeking opportunities in the huge Iranian market. Effectively, the U.S. government spent significant time and effort to get to an agreement that gives away the Iranian market to non-U.S. businesses.
At first, many U.S. businesses were shocked that, except for previous exceptions for food and medicine and the new exception for passenger aircraft, they were not going to be able to pursue projects in Iran following Implementation Day. The arguments for the continue enforcement of the various sanctions (which are part legislative and part from executive orders) are several. Let's review some of those arguments.
One, that Iran continues to support terrorism and abuses human rights. It is often repeated that Iran is the largest sponsor of terrorism in the world. Unfortunately, such arguments are typically made by uninformed people. The reality is that Iran is no more, and certainly less of, a supporter of terrorism than many other countries in the region. Iran certainly does not have a tradition of Jihad whereby it sends militants to attack U.S. interests. Certainly, Iran's activities can't compare to the negative impact of the multi-decade effort by other Middle East powers in to spread extreme religious and cultural thinking by way of funding and controlling schools, mosques, militants and other institutions. And, Iran's human rights story, while not laudable, is no worse than many other countries, which are often stated to be a U.S. "friend" or "ally".
Two, that Iran is a totalitarian state with no respect for democracy. There are very few other Islamic-majority countries in the Middle East that have any aspect of democracy. But, just on 26 February 2016, Iran had elections for its national and local representatives. Although those elections are flawed in many respects, they do result in some degree of popular representation, something few other countries in the region can say. And, in this case, it is generally considered that the "moderates" made significant advances in the election.
Three, Iran is a threat to the U.S. ally of Israel. This tired argument misses the point that many other countries in the region have actually had wars with Israel, but Iran never has participated in those wars. And, the U.S. commitment to the defense of Israel is so unqualified that any attack on Israel would be suicide by Iran. Not going to happen.
There are other arguments, but they also have little foundation in reality or history and can largely be rebutted, including by noting that U.S. companies are allowed to do business in many countries that actually conduct the activities that are attributed to Iran. Perhaps more important, there are many arguments that would support a U.S. policy of business engagement with Iran.
First, everyone who has any actual knowledge of Iran knows that the Iranian people are big proponents of doing business with Americans. My personal experience with regular Iranians and every person I've known who has visited Iran comes away with stories of how hospitable the Iranian people are and how much they say they love America and Americans. To not allow U.S. businesses to operate in Iran risks diminishing the positive attitude that Iranians have of Americans and America.
Second, allowing U.S. businesses to be present in Iran and engage with more Americans can only increase the positive view of the U.S. inside Iran. In fact, the hardliners in Iran are quite happy that the U.S. is preventing most U.S. companies from doing business in Iran because they are very concerned that the image of the U.S. is a threat to the hardliners' control of various aspects of Iranian life, many businesses in Iran and the overall propaganda effort that the U.S. and Americans are the Great Satan.
Third, without any U.S. engagement in Iran, the U.S. government will have almost no access to first-hand knowledge of what is happening in Iran.
Fourth, the European and Chinese companies will excel in Iran without U.S. competition, leading to the strengthening of the non-U.S. companies and the loss of jobs and income in the U.S.
In summary, the arguments against allowing U.S. companies to do business in Iran are weak, at best, and certainly are illogical given how the U.S. doesn't have such restrictions for doing business in other countries whose actions are much worse by comparison. And, there are many strong policy arguments to allow U.S. companies to do business in Iran. Congress does not seem to have the sense or the will to make the right decision on this. U.S. business interests need to join efforts to pressure Congress and the president to change the law and eliminate most of the remaining sanctions so that U.S. business competitiveness and U.S. jobs are a priority.
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