Iran goes shopping in the West. There’s more at stake than cars and planes
Today the 737 MAX, the latest version of Boeing’s narrow-bodied jet, makes its first flight. It will do so with minimal fanfare. The American aircraft-maker is trailing behind Airbus, its European arch-enemy, which has already clocked in 5,535 orders for the rival A320 (compared to 3,072 for the 737). And the gap is getting even wider. This week Airbus sold another 118 planes to an unexpected client – Iran.
The sale took place during the first European tour by an Iranian leader in almost two decades. Prompted by the recent lifting of Western sanctions, the visit saw France and Italy’s business elite rush to strike deals with a spendthrift Hassan Rouhani. But the occasion was as high in emotions as it was in dollars. Amid talks of a historic rapprochement, protests erupted in Paris over Tehran’s breaches of human and woman rights. People also took to the streets in Italy – over Rome’s decision to appease the Islamic leader by covering up nude statues.
That his short visit can stir up such passion suggests how much there is at stake. European companies stand to receive the most tangible prize: as Iran seeks to buy items it's not been able to get its hands on for years, its chequebook is more open than ever. This week Rouhani agreed to a €400 million deal with Peugeot Citroën, a contract with Total of up to 200,000 oil barrels a day and talks to restart Fiat sales in Iran. Italy is said to have signed deals worth about €17 billion; the Airbus sale alone is valued at $27 billion.
It helps that Rouhani represents one-stop shopping by himself: the Iranian state controls about 80 percent of the country’s economy. But doing business with Iran is not yet business as usual. A potential hurdle may come from America: although Tehran is looking to buy from European companies, the US Treasury must approve sales of planes made with over 10 percent US parts. Financing the purchases, which are libelled in dollars, won’t be straightforward either: some sanctions on Iran’s financial system still remain in place. Insiders say Western banks won’t feel comfortable lending for an aircraft deal before another 18 months.
European companies involved will be burnt if the deal collapses. But the fallout would be worse for Rouhani himself. The president’s visit is as much about domestic politics as it is about business: engaged in a fierce battle against hardline conservatives back home – who oppose a rapprochement with the West – the reformist leader wants to show his people that playing it soft on nuclear is paying off through economic benefits. After decades of isolation, he also wants to show that Iran is now taken seriously abroad.
Emboldening Iran’s conservative forces by derailing agreed deals would be a step backwards for the West. Business aside, Washington and Brussels badly need Tehran to be more co-operative on solving the Syrian crisis and dealing with ISIS. That doesn’t mean Western leaders should now give up on issues like human rights and state sponsorship of armed proxies – and it’s a good thing that such topics were not eluded this week. But simply talking to Rouhani probably won’t prompt meaningful change – as far as Iran goes, it’s preaching to the converted.
As for the statue problem, well, nothing is set in stone. Perhaps next time the event organisers can choose a meeting place where the figures on display have less obvious attributes.