Is Iran the Last Great Emerging Economy?

It’s not very often that an economy of 80 million people – most under 30 and highly educated – comes online after decades in the economic wilderness. But that’s what happened on Implementation Day, when countries around the world lifted their sanctions on Iran.

CNBC reports: “Fund managers in Iran are poised for what they hope will be a wellspring of interest from international investors as last week’s lifting sanctions should allow foreign investment in the region for the first time in over three decades.”

And global investors, of course, are ready to pounce; the CNBC article highlighted the work of Griffon Capital, which hopes to raise 100 million ($108 million) euros in 2016: “The group said it is seeing significant investor interest in Iran in a significant pipeline of initial public offerings (IPOs) and privatizations expected in the next two to three years.”

But as it stands, US investors are set to be left out of the action. While the United States joined the world in lifting sanctions related to Iran’s nuclear program, the vast majority of America’s decades-old sanctions remain in place. So while Asian and European companies and investors jump head first into the Iranian gold rush, Americans will be relegated to the sidelines.

The Guardian reports: “But while the accord has been billed as a flagship of Barack Obama’s foreign diplomacy, the US might be among the last to benefit commercially. Only a small fraction of US sanctions – those related to Iran’s nuclear activities – will be suspended as part of the deal, which also allows for a ‘snapback’ of all sanctions in the event of non-compliance.”

The article underscores how excited European and Asian investors are in the prospect of Iran coming online: “Other countries, however, appear to have embraced the deal and Iran’s potential as a sleeping giant. “If you want to see optimism, you just go to Dubai airport at about 8am,” Adam Smith, a lawyer focused on international trade compliance, told the Atlantic Council thinktank in Washington recently. “Ten flights a day between Dubai and Tehran, all packed.”

A CNN Money story highlights the murky situation American companies are in: “But it remains complex. Take a company like Apple (AAPL, Tech30). It can apply to Treasury for a waiver to ship iPads to Iran from the U.S., but its U.S. business can’t service the device or open a store in Iran. Apple could also face penalties if the iPad landed in the wrong hands. However, a European subsidiary of Apple could operate in Iran after Implementation Day. It just couldn’t talk to Apple HQ in California about the Iranian operations.”

The piece goes on to say that many observers don’t expect the situation to change any time soon: “”There is not going to be a comprehensive law allowing all U.S. companies to operate in Iran anytime soon. This will make American firms the biggest loser of the nuclear deal,” says Majid Rafizadeh, a Middle East scholar at Harvard. The latest flare up between Iran and Saudi Arabia could make the U.S. even more cautious about scaling back additional sanctions.”

But even with most sanctions lifted, Iran may well still prove a difficult place for foreign investment.

Reuters reports: “Iran has been under sanctions so a lot of international business practices are not as common there as they are in other emerging markets,” said Farhad Alavi, managing partner at Washington-based Akrivis Law Group. President Hassan Rouhani, who championed the nuclear deal, has ordered his government to facilitate foreign investment but also warned of the “long road” to Iran’s economic integration with the world. Rouhani said on Sunday his oil-producing country needs $30-$50 billion a year in foreign investment to meet its economic growth target of eight percent. It attracted an average of only $1.1 billion of foreign direct investment annually between 1996 and 2004, before major economic sanctions were imposed on it, according to the United Nations Conference on Trade and Development.”