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Iran’s Economy Still Struggling to Find Foreign Investment

In another turn of events signalling that foreign firms are still wary of doing business with Iran, even after the lifting of various sanctions as part of the 2015 nuclear agreement, Bouygues has cancelled its preliminary deal to build and run a new terminal in Tehran’s Khomeini airport. The deal was signed originally last year.

A Bouygues company logo is seen at the World Efficiency congress in PariThe memorandum of understanding awarding Bouygues the contract was agreed to in January 2016. Yet financing proved to be an obstacle for this construction firm. International banks remain unlikely to do business in Iran. They are concerned about potential violations of U.S. sanctions that are still in place regarding the regime.

The project was hindered by these financial obstacles, according to a report by the online newspaper La Lettre de l’Expansion. However, the company has not given up hope of doing business in Iran.

“The MoU is now void but there are still ongoing discussions with Iranian authorities,” said the Bouygues spokesman.

Other key players have stepped out of the project for various reasons. Aeroports de Paris initially was Bouygues’ partner for the Tehran airport terminal’s development, but in February they stepped down, announcing they would no longer take part in the project. France’s Vinci had also signed preliminary deals last January to build an extension of Iran’s Mashhad and Isfahan airports. These are the country’s second and fifth largest airport hubs. Negotiations on this deal are still ongoing with the Iranian authorities.

Despite these deals not moving forward, Iran still remains a major potential market for construction and foreign investment firms. It is the 2nd largest population in the Middle East and has been isolated from Western firms for decades.

After years of economic sanctions imposed by the West and years of government mis-management, Iran faces a real economic crisis. Rouhani has touted foreign investment as the answer to survive the regime, yet that investment has been slow to roll in and has barely trickled down to the average Iranian.

 

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