An interview with Mohammad Marandi, Professor of English Literature and Orientalism, University of Tehran
Pequod Advisors posed a series of questions to Prof. Marandi concerning the Iranian business environment, china trade, oil and gas, and us economic sanctions.
The following interview has been lightly edited for clarity.
PAG: The EU’s rhetoric has been about encouraging European companies, particularly SMEs, to continue trade with Iran. What are the three key things that a European company should know – or should be informed of – before entering the Iranian market?
MM: I think the key thing about Iran is that it is very stable. It is the most stable country in this part of the world and I believe that will continue to be the case. Secondly, Iran’s influence in the region has grown extensively and in the future this will create great economic potential. And third is that Iran has a large and highly educated work force.
PAG: With the pullback of major European companies in 2018 – Total, Daimler, Airbus – where does Iran look to for foreign investment and commercial partnerships?
MM: I think that increasingly Iran will be looking at Asia, and over the next couple of years, I think that China in particular and Iran will be looking for ways to replace European companies.
PAG: How would you characterise the commercial relationship and business activity between Iran and Turkey?
MM: Relations between Iran and Turkey have improved significantly since the coup, especially since Iran supported Turkey during the coup. Also, ever since the tensions have increased between Turkey and Saudi Arabia, UAE and Israel, the relationship has evolved even further. And of course the US presence in Syria has also improved Turkish-Iranian relations too. Therefore, at the moment relations are very good and this has important consequences for their commercial and business relations as well.
PAG: Which of Iran’s trading and investment partners do you believe are undervalued at present, or have potential to increase in value in the near- to mid-term?
MM: I think it is probably China. Iran until now has been working hard to improve relations with western governments, but I think the political establishment in Iran and the elites are finally beginning to seriously question our long term future with Western powers. Therefore, I think they are increasingly being convinced that Iran has to look to the East.
PAG: The EU is still attempting to pull together the Special Purpose Vehicle (SPV). After several months, Germany and France have finally agreed to take the lead in hosting the institution. Does this send a strong enough signal to the leadership in Iran of Europe’s commitment to the JCPOA? And what are your thoughts on the significance and practical usefulness of the SPV?
MM: I think that the SPV is viewed as not very significant in Iran, and it simply shows Iranian leaders and politicians that Europe is weak and incapable of standing up to Trump. I do not think people in Iran think the SVP to be very significant or useful, but we will have to wait and see if the Europeans are willing to follow with more significant steps or whether they are going to leave things as they are.
PAG: In your view, what is the desired outcome of the Iranian government with respect to the JCPOA in order to ensure their continued compliance with the terms of the deal?
MM: The desired outcome for the Iranian government is for the Europeans to abide by their commitments, which they are not doing. So increasingly, there are voices in Iran that are saying that Iran should leave the JCPOA. At the moment, the Iranian government has decided to continue abiding by the agreement because Iran has politically isolated the Americans as a result, but if things continue as they are, I doubt that the JCPOA will last forever.
PAG: China remains Iran’s largest trading partner and has continued to purchase Iranian oil. With China set to take over Total’s stake in South Pars, what are the pro’s and con’s of such heavy dependence on Beijing’s capital and influence?
MM: I believe that many in Iran would like to have a greater diversity among investors but I think European weakness and US policy is pushing Iran closer towards China. I think China will play a more important role in the months and years ahead when it comes to investment in Iran, and it is basically as a result of European and US policy.
PAG: How would you describe the sentiment among Iranian business community when it comes to China?
MM: I think the sentiment among the Iranian business community towards China has improved, because the Chinese have treated Iran better than Western governments, including the Europeans. Although, Iranians have had less interaction with the Chinese in the last couple of centuries, the current situation is providing a better opportunity for greater interaction. For example, we now see a large number of Iranian students studying in China and a large number of Chinese students study in Iran. Things are evolving, and I think that the Europeans and US policies have been a catalyst to push these two countries closer to each other. I forecast that Chinese influence in the Iranian economy will increase.
PAG: The Iranian economy is heavily dependent on its ability to sell oil and gas. The latest US sanctions seek to specifically eliminate this source of revenue for the country. What is the overall state of the Iranian oil and gas industry?
MM: US sanctions do pose a significant challenge for the Iranian oil and gas industry, but Iran does continue to sell a significant amount of oil and gas, and a lot of it is sold openly. My understanding is that a significant amount of oil is also being sold off the radar screen and to small private companies and individuals. One recent issue in the oil and gas market was when Saudi Arabia increased its production and prices collapsed. That was because they over-estimated the ability of the US to decrease Iran’s exports. Hence, Iran is exporting oil to many of its traditional partners.
PAG: In May 2018 the Trump Administration withdrew from the JCPOA and announced the reinstatement of US unilateral economic sanctions on Iran. Since 5 November Iran’s oil and gas sector has been targeted along with its ability to access international financing mechanisms. How is this re-introduction of sanctions different from those under the Obama administration?
MM: The difference between the sanctions under Trump and Obama is that while Trump is being more inflexible in trying to impose the sanctions, the sanctions do not have any form of UN Security Council backing whatsoever and the United States under Trump is very isolated and has many antagonists across the globe. The Europeans are upset with Trump, the Chinese are in conflict, and the Russians are also facing problems with the US. So the United States has a much more difficult time now in creating any form of coalition: It is almost impossible for Trump to form any kind of coalition, whereas Obama was much more successful in this regard. Thus, Iran’s political position today is much more enhanced than under the previous sanctions regime under Obama.
PAG: How has the business community responded to the re-instated US economic sanctions regime?
MM: The business community is looking for ways to circumvent the sanctions, but I think that one thing that Trump has done, is that he has created a consensus among Iranians that the US is truly antagonistic towards Iran. In the past, many Iranians did see the US as a bully and antagonistic towards the country, but there was always a segment in the population that thought otherwise. But this belief today under Trump is almost universal, so it has united the country and in that sense strengthened the country despite the difficulties. I think that the business community is struggling and there is pessimism about the current economic situation. But I believe that since people blame Trump this has strengthened a strong sense of resilience.