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Trade in Tehran

Emily SherwinFebruary 7, 2014

A visit by a French trade delegation to Tehran last week sent diplomatic sparks flying between Washington and Paris. But is there more than diplomacy at stake in the struggle over Iran's economic future?

A person's hands counting Iranian money
Image: www.asio.ir

French Minister of Foreign Affairs Laurent Fabius received a call from US Secretary of State John Kerry on Tuesday (04.02.2014). Kerry told him the French trade delegation scoping out business opportunities in Iran was "not helpful" to ongoing diplomatic negotiations with Iran, and that contravening the current sanctions in Iran would have serious consequences.

After all, despite the interim deal between Iran, the European Union and the P5+1 nations - the United States, United Kingdom, France, Russia, China, and Germany - which came into force on January 20, restrictions on Iran's banking, financial and oil sectors are still in place. The deal saw Iran promise to curb its uranium enrichment activities in return for sanctions relief that is valued at between $6 billion and $7 billion (between 4.5 billion euros and 5.2 billion euros) over six months.

But the relief does not mean a return to "business as usual" in Iran, Kerry said. Still, a delegation of 116 French companies were in Tehran on a trip organized by the French employers' syndicate MEDEF. French Finance Minister Pierre Moscovici hit back at the American warning, saying that the delegation was a "bet" on the future of Iran rather than "business as usual."

French Finance Minister Pierre Moscovici (Photo: AP Photo / Geert Vanden Wijngaert)
French Finance Minister Pierre Moscovici has spoken out about Kerry's commentsImage: picture-alliance/AP

The transatlantic spat has now raised questions over how much current tensions are truly about overstepping the boundaries of the interim deal and how much it is simply the United States and France locking horns.

Rising diplomatic heat

Myriam Benraad, a French political analyst specializing in Middle Eastern politics at the European Council on Foreign Relations (ECFR) and an associate researcher at the French university Sciences Po, put the uproar the delegation's visit caused down to diplomatic sparring.

"There has been a sort of diplomatic tension that has arisen from the fact that the French, and MEDEF in particular, made this visit without planning with the Americans," she told DW. "But France is a sovereign state."

Benraad added that France has not overstepped any boundaries.

"The French are not acting outside the diplomatic framework that was put in place after November 24, in the framework of the Geneva accord," she said. "The policy being advocated - by the Americans as well - is one of opening, one that intends to get Iran out of its isolation on an economic level."

Given the legality of the French actions - both MEDEF and the French government have taken pains to refer to the trade mission as "exploratory" - observers could be forgiven for thinking that the public chastisement of the French trip to Tehran is an attempt to make an example of France. Especially when there have been reports of a string of other foreign trade missions to Tehran since November.

Uranium mine in Sagand, Iran
Under the iterim deal, Iran has agreed to curb its Iranium enrichment programImage: picture-alliance/dpa

Political power play

"You can say that by telling off the French perhaps [Kerry] is trying to make sure that everyone else toes the line as well," said Rouzbeh Parsi, a senior lecturer in Iranian modern history and politics at Lund University in Sweden.

Parsi said the US might be pointing the finger at France in particular because the commercial trip, which included some of France's biggest international players such as Total, L'Oréal and car manufacturers Peugot and Renault, was quite a volte-face for France. In November, talks on Iran's nuclear program in Geneva stalled due to France's tough stance.

According to Parsi, the French complaints at the time were less about the substance of the agreement than about trying "to show the Americans 'you still have to deal with us, you can't deal with the Iranians and think it's done.' To show France is still relevant."

Though France may be trying to assert its importance on the world stage in connection to Iran, neither Paris nor Washington has lost sight of economic interests. Iran holds almost 77 million potential customers within its borders - it is the country with the second-largest population in the Middle East. According to the US Energy Information Administration, Iran also holds the world's fourth-largest proven oil reserves and second-largest natural gas reserves, the latter of which are largely undeveloped.

No illusion about an untapped market

Parsi said the Iranian market is a significant one that no international player will want to ignore as it is "one of the gateways to central Asia." He also said he is also sure that the MEDEF won't be the last delegation to visit Iran.

Renault Twingo (Photo: DANIEL ROLAND/AFP/Getty Images)
Renault was among the 116 French companies in the trade delegation visiting IranImage: Daniel Roland/AFP/Getty Images

"Most of the sanctions that are stopping trade or discouraging trade with Iran are still in place," he said. "These companies don't have any illusions that suddenly everything has changed and they can start transferring money and investing. But, of course, they want to make sure that if and when we reach that point, they are not caught on their back foot."

Trade delegations "not helpful"?

The interest from Western investors has been welcomed by Iran and Iranian media reported extensively on the French visit.

Benraad said the reaction has been largely positive: "I think that in Iran there is a demand for the return of the Westerners, notably of Western investors. And I think that the French received a warm welcome, not only by Iranian managers but also by the Iranian public."

Mohammad Javad Zarif with John Kerry
Iranian Foreign Minister Mohammad Javad Zarif has said the US comments this week could damage nuclear talksImage: Getty Images

Meanwhile, Iranian Foreign Minister Mohammad Javad Zarif has contradicted Kerry's claim that the open expression of Western economic interest in Iran will have a negative impact on further nuclear negotiations in Geneva. According to Reuters, Zarif ciriticised US comments last week, saying they "could aversely impact the [nuclear negotiations]."

According to Parsi, Western negotiators need to put up a united front if they want all their demands to be met. "On the other hand, you want to encourage the people you are actually dealing with in Tehran in their struggle against their own hardliners," he said.

"Having people go there and let the Iranians see the possibility of opening up for business with the West is of course helpful for those who are arguing that this agreement is useful for Iran," he said. "It's an incentive."