Link for the curious: http://www.nytimes.com/2016/01/26/business/international/airbus-iran-aircraft-talks.html?_r=0
After nearly two decades of being economically isolated from the Western world, Iran is now open for business after its economic sanctions have been lifted following their promise to curtail its nuclear program. The new market proves to be opportunistic as Western businesses are now providing flows of cash to and from the middle eastern nation. Companies have been eagerly waiting to make inroads into Iran as its population consists of a large portion of young consumers who have shown their taste for western consumer products such as Apple.
Although there is large optimism for the promise of a new market, investors also share worries about Iran's entry into the oil market in an already tumultuous time where we have seen oil drop below $30 per barrel. Oil is one of Iran's most profitable exports so they will obviously be looking to return to a leader in the industry.
Another serious issue regarding the opening of Iran's market is how to make credit available from western banks. Currently, the United States Treasury marks them as a "State Sponsor of Terrorism" label. The label means that no money intended for Iran can move through American banks, which is very difficult to do in today's day and age.
There definitely do seem to be two sides to the coin in terms of Iran's newly reopened markets. On one hand, you have a huge market of hungry consumers for Western products who have been denied acquiring these products for almost two decades. On the other, you have the issue of credit not being available from American banks as the Iranian political relationship with the United States has a history of being strained. Do you see this as a smart or risky opportunity for Western companies?
This is an interesting dynamic. I would say that it is risky, because a company does not want to have ANY links to terrorism. I'm not saying the risk is high, but there is still a risk. If Iran is accused of sponsoring terrorism, and a US company is involved, it will be very hard to live that down.
ReplyDeleteThank you for posting the link, I was actually quite curious... I also agree with Samuel that it is very risky if Iran is marked as a "State Sponsor of Terrorism." I think that it would be wise to pull out of anything with Iran if there is a chance that they have ties with terrorism. But I also feel like we should give them a chance and slowly work our way into Iran making sure it is safe.
ReplyDeleteWhen watching the Democratic debate earlier this week a question came up about Iran and US relations, and both canidates seemed "uncertain" on their answers about what should be done and that only time can tell.
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