International business executives looking at Iran invariably see plenty of dollar signs, but there is always a caveat or two whenever the discussion turns to how and when to enter the country.
Some point out that while Iran has a large, young and well-educated population, the Revolutionary Guards Corp is deeply entrenched in the economy. Others note that there is a clear need for international investment and expertise in the oil and gas, mining, transport, manufacturing and consumer goods sectors,
to list just a few, but ongoing
US sanctions on financial dealings with Iran make global banks skittish. This is not a one-way street. There are people within the Islamic Republic who are glad it can re-enter the economic mainstream, but also worry about what it might mean for their position in the economy. The concerns, however, appear more concentrated in Western companies.
The message from the top is still clear though.
â€œThere is no limitation in economic engagement as long as mutual interest is served,â€ Mohammed Nahavandian, chief of staff for President Hassan Rouhani, told an Iran investment conference in London earlier in March. â€Our trade policy is going to be very positive towards foreign investment.â€
If the government is to realise its ambitions, some problems will have to be addressed.
One is the fact that Iran is a country with many competing centres of influence and, while the Rouhani administrationâ€™s policy might be clear, there can be difficulties when you move further along the chain.
â€œIn my experience, the higher up you go in the Iranian government, the more positive the
attitude is towards foreign investment,â€ says Rouzbeh Pirouz, chairman of Tehran-based investment firm Turquoise Partners.
â€œThe real problems arise not at the very top, where I think a decision has been made quite correctly that the country needs foreign investment to realise its potential. The problem arises more in the lower levels, where vested interests feel threatened.â€
An even bigger stumbling block is US sanctions.
The UN, EU and others have dismantled their embargoes, but Washington has retained some, particularly those on the banking sector. Given the huge US fines levied on banks over recent years for busting sanctions on Iran, Sudan, Cuba and elsewhere, most big lenders are nervous of going anywhere near Iran, lest they fall foul of the remaining injunctions.
The UK is among those trying to square the US position with its own desire to engage with Iran, but Tehran seems dissatisfied with the pace and is pushing it
to do more.
Speaking after a meeting with the UKâ€™s Prime Minister David Cameron on 10 March, Nahavandian said: â€œWe need to see the facilitation of banking relations as soon as possible â€¦. Non-US banks should not be limited in any kind of banking transactions with Iranian banks. That has to be delivered and Britain can do a lot on that.â€
Alongside this, significant reforms are needed in Tehran too.
RECAPITALISING IN IRAN
Among the most often cited issues is the need to restructure and recapitalise the banks, a task that is high up the to-do list for the Central Bank of Iran.
â€œThe capital adequacy ratio in the Iranian banking system is low. We are going to take all necessary measures to repair that,â€ says Peyman Ghorbani Aghilabadi, vice-governor for economic affairs at the central bank.
Some elements of the macroeconomic picture are at least moving in the right direction, which makes planning any entry into the Iranian market that little bit easier for international companies. The Rouhani administration has managed to significantly reduce inflation, cut the gap between the official and market exchange rates for the rial, and return the economy to growth.
It now wants to reduce inflation further, unify the exchange rates and achieve GDP growth of 8 per cent a year.