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Bolurfrushan: Bank Pressures Hit Iranian Business Harder than Sanctions

Interviewee: Abbas Bolurfrushan
Interviewer: Lee Hudson Teslik
April 25, 2007

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Abbas Bolurfrushan is an Iranian businessman who served through March 2007 as President of the Iranian Business Council in Dubai, an organization which facilitates Iranian-UAE business interests. Bolurfrushan says U.S. sanctions have had a limited effect on Iranian businesses, but that Washington’s efforts to prevent international banks from dealing with Iran have a much more serious economic impact. He says Western news reports that Iran is struggling with inflation and unemployment are “basically” true, but that business flight from the country has more to do with fears over a military attack than economic problems.

There have been reports in Western newspapers saying Iran’s economy isn’t doing so well. They tend to cite rising inflation and unemployment under the current president, [Mahmoud] Ahmadinejad. What do you make of these reports? Are they overblown?

They might be a little overblown, but basically they are true. The economy is under pressure from the isolation of Iran economically and politically. And especially by the brain drain. I would agree that the economy is not as bad as the Western papers explain it. The lifestyle in Iran looks normal. We don’t have anybody sleeping on the streets. The number of beggars on the streets has not increased. But of course the number of unemployed people is increasing. The drug abuse is increasing. And brain drain is on the increase as well.

Ahmadinejad’s main political rival, Hashemi Rafsanjani, has used the economy as one of his main criticisms of the president. Do you think it’s fair to pin the inflation and the unemployment on the president’s policies?

Mr. Ahmadinejad’s policies have accelerated what had existed before. The reason for the recent exodus from Iran is really the fear of a military attack on Iran, not the economical situation so much.

However, if there are more sanctions and the grip is tightened, the economic effect will force more Iranians to get out of the country and do their business someplace else. The UAE [United Arab Emirates], and especially Dubai, has become the easiest place for Iranians to settle down.  There are two reasons: First, it’s closest to Iran; secondly, the business facilities here in Dubai are up to world standards and the government of Dubai is really keeping its arms open for any businessman who wants to do business in Dubai .

What would happen if the economic sanctions were lifted tomorrow?  Would Iran see an economic boom right away?

What we all hope for is a normalization of the relationship. That is of course a wider expectation than the sanctions being lifted. As far as we know, the restrictions in the three previous sanctions issued so far have little effect on business. But the American government has persuaded a lot of international bankers to stop dealing with Iran, and most of them have taken this advice or these instructions. So the economic grip on Iranian banks has really had a lot of effect on international trade.

So it has more to do with perceptions than the sanctions themselves.

Exactly.

What is Rafsanjani’s role in all this?  Is he very close with the business community?

He has taken a back seat since Ahmadinejad has taken over. We hear that there are a lot of grievances on his side with the administration of the government by Ahmadinejad, but they are both trying to keep this out of the public eye. There must be some inside fight between the various sections of the government, as well as the Expediency Council that is headed by Rafsanjani.

I would suspect that the business community might be a place where he might find support. Is he reaching out at all?

No, not at all, nothing has been visible in that direction.

What of the current nuclear standoff? How is the business community reacting, other than, as you mentioned, the fear of a military attack?

We are just hopeful that negotiations start between America and Iran so they can reach a compromise and Iran can suspend enrichment for some beneficial deal they can get out of America or the United Nations.

Can you talk a bit about doing business in Iran? Is there a lot of bureaucratic red tape? Is it an easy place to do business, internally?

Well, the complexity of the legal system in Iran, together with the chaotic administration of the country—after the revolution, the administration of the country was taken over by people who had very little experience—they have created a very difficult atmosphere for doing business in Iran.

That said, quite a lot of businessmen in Iran who could not get out of the country, or transfer their business somewhere else, taught themselves to live with the present system. They hired wheelers and dealers to get their business done. They got business done through connections. There has been bribing in the regime. The inflation is high and the government salaries cannot cover the expenses—so in a society like that, bribery is happening every day.

Then, on the other hand, the government of the UAE has created a very friendly atmosphere for business, particularly in Dubai.

The State Department said it was setting up its “listening post” in Dubai to keep an eye on Iran. Have Americans been contacting you over there? How has it affected Iranians in Dubai?

I have no knowledge of the extent of their operations here. They call themselves the “Iran desk,” and I know they have concentrated their efforts to gather information for the benefit of the U.S. administration. The only contact I’ve had was a year ago when someone from American Consulate in Dubai called me to seek my assistance in minimizing visa procedures for Iranians. They asked my assistance when I was the head of the Iranian Business Council, but I had to get clearance from Iran’s Consulate in Dubai, and they have not allowed me to assist them.

It’s been a goal of the Iranian government to reduce its oil dependence. Rafsanjani has criticized Ahmadinejad for not achieving this, saying Iran’s actually becoming more dependent on oil. Is this true?

Well this new president, Mr. Ahmadinejad, has only been in office for the last one and a half years, or close to two years, still not enough really to see all the effects of his administration’s decisions on this issue. All Iranian governments have been trying to reduce Iran’s dependence on oil, but they haven’t been able to do it mainly because of the effect of all these sanctions and embargos which have been in place since the 1980s. So they have not achieved their goals. The only goal they’ve achieved is that they’ve increased Iran’s petrochemical productions, so now a lot of earnings come from petrochemicals, and not just crude oil.

Do you see anything coming from these natural gas talks they just had in Qatar?

Well, not really anything particular except that the gas-producing countries in the Middle East agree that they should put together their force and create a cartel for that. I don’t know whether they will succeed. Over the long term, I do think they’ll succeed, although the success will depend on how many members they can attract to this cartel.

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Transcript

Can Negotiations With Iran Succeed?

Speakers: Sen. Angus King and Margaret Brennan

Broad-based international economic sanctions on Iran have significantly impaired its economy and brought the regime to the negotiating table,...