Let Iran Prove Its Worthiness

Young Voices Advocates
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Posted: Aug 02, 2016 12:01 AM
Let Iran Prove Its Worthiness

Editor's note: This piece was authored by Danielle Zaychik.

Over the past two months, Secretary of State John Kerry has embraced a new role as the personal lobbyist of the Iranian government. Tehran expressed displeasure with the speed at which investors are entering the Iranian market since international sanctions were lifted last January. Fearing that this will prompt the Islamic Republic to abandon last summer’s nuclear deal, Secretary Kerry met with banks and businesses to assuage their concerns about partnering with Iran.

Many experts have noted that investing in Iran comes with a high risk of financial crime, including money laundering and terrorist financing. Indeed, Secretary Kerry seems to be persuading businesses to take substantial financial risk for the Obama Administration’s political agenda. Iran actively works to undermine US security goals in the region, further adding to the irony of doing business with the Islamic Republic.

However, perhaps most concerning are the implications of Secretary Kerry’s actions for the future of the Iranian people. Left to play by the rules of international free trade, Tehran may have incentives to reform its oppressive and dysfunctional regime in order to attract foreign business. This would drastically improve the quality of life for Iranian citizens.

As it is, many characteristics of the Iranian domestic economy and government are problematic for investors and Iranian citizens alike. In 2015, Iran was ranked 130 of 168 countries for corruption according to Transparency International. Unemployment is high (almost 12%), as is inflation (7.4%), which was 16% as recently as June 2015.

Key institutions that facilitate prosperity remain weak. For instance, the Heritage Foundation gave Iran a 10 on a 1-100 scale measuring the security of property rights, a key facilitator of economic development. According to the organization, this score means that “private property is rarely protected, and almost all property belongs to the state.”

The World Bank Group ranked Iran just under the fifth percentile for regulatory quality, 35th percentile for control of corruption, 14th percentile for the rule of law, and 17th on political stability and absence of violence. Civil liberties are very weak. The country is ranked just 169 of 176 for overall economic freedom and 118 of 189 for the ease of doing business. Finally, Iran is the world’s number one state sponsor of terrorism and is known for laundering money to terrorist networks in the region.

These statistics paint a bleak picture both for international investors and Iranian citizens. If the Islamic Republic wants to attract foreign business, it needs to become more appealing to business. Foreign investment and trade can serve as a free market incentive for the country to tackle corruption, crack down on money laundering, facilitate open markets, ensure individual rights, and uphold a just legal code.

Iranians deserve a government that upholds their individual rights. A recent editorial in the New York Times pleaded with the public not to let Iran’s progress in scaling back its nuclear weapons program go to waste. However, at this point, the ball is in Iran’s court. If Iran wants to profit, it must play by the rules that dictate free trade. It will have to make internal improvements and work to attract business. Giving Iran special trade preference will cost American investors, as well as 77 million Iranians who deserve a better society.

Opening Iran to the global market can be a win-win situation for the citizens of Iran and businesses around the world. However, this will only occur if private investors are primarily concerned with the profitability and economic opportunity of working with Iranian counterparts. Bending to the political agenda of the Obama administration will obscure the potential benefits on both ends.

Danielle Zaychik is an incoming doctoral candidate in Public Policy and Political Economy at the University of Texas at Dallas.