Iran sanctions hinder privatisation progress

27 July 2010

Tehran’s privatisation plans thrown off-course as restrictions continue to target foreign trade

The Tehran Stock Exchange may be the second-best performing equity index in the world but it is not an accurate barometer of the health of Iran’s economy.    

On 9 June, the UN Security Council imposed a fourth round of punitive sanctions on Tehran over its controversial nuclear programme. The sanctions target foreign trade, financial services and the oil and gas sectors – the backbone of Iran’s economy. 

Iran desperately needs foreign investment and is counting on income from privatisations

Perhaps more significantly, they target the Islamic Revolutionary Guard Corps which controls at least a third of the economy.

Iran’s reaction has been characteristically defiant, warning that those who present any opposition will come to regret it.      

But the country’s political stance is at odds with its economic ideals.

For all its bravado, Iran desperately needs foreign investment and is counting on income from privatisations to help solve its economic problems.

In early April this year, the government published a list of 90 companies shortlisted for privatisation by 2014, with around 50 considered high-priority, including national carrier Iran Air.

Inevitably, the sanctions are throwing these plans off course. There has yet to be a listing on the exchange this year. In May, the public offerings of two Iranian automobile giants were delayed indefinitely in light of uncertainty over their international commitments.

Foreign investors are now shunning the market. Meanwhile, in targeting the Islamic Revolutionary Guards, which rank as one of the most influential buyers of Iranian companies, the latest sanctions have dealt a further blow to the country’s privatisation plans.

If Iran is serious about bringing about economic and social change, it will have to put bitter politics aside and focus on rebuilding its relations with the outside world.  

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