Tehran Says Sanctions Are Backfiring.

Iran's business community is launching its own campaign to counter Western economic pressure on Tehran, arguing that European companies were missing big new opportunities. Iran's Chamber of Commerce President Mohammad Nahavandian, one of the Shi'ite theocracy's most senior business figures, was in Britain recently to warn the government and the business sector that the US-led policy of discouraging commercial ties with Tehran was likely to backfire.

The FT on Feb. 4 quoted Nahavandian as saying: While Washington was leading efforts to pass tough new UN Security Council (UNSC) sanctions against Iran this month, the UK's reluctance to invest in Iran meant it would lose deals to China, India and Russia. He argued that as much as $200 bn (135 bn, [pounds sterling]102 bn) worth of investment and a greater role envisaged for the private sector would open up in Iran's energy sector, including petrochemicals, over the next three years. But in reality none of the projects which require foreign financing is acceptable to Western banks. He dismissed the argument made by the US, UK and French governments that tougher economic sanctions would force the Iranian business community to pressure the leadership to alter its nuclear policy, saying: "If the business and economic relationship improves then that ultimately will lead to progress in resolving political differences between Iran and the international community". The Iranian government's privatisation plans, he predicted, would see investment opportunities opening up in the transport and aviation sectors, while the UK had a particularly strong contribution to make in the provision of financial services. But in reality President Ahmadi-Nejad has blocked privatisations already.

Nahavandian lamented that Britain - once one of Iran's biggest trading partners - had reduced its economic relationship after the West's tough sanctions line over Iran's nuclear programme. The UK government does not actively discourage from from doing business with Iran, but the reluctance of banks to issue lines of credit or to handle payments - because of US pressure - has undermined the trade relationship. Nahavandian said: "Countries such as Britain are sanctioning themselves rather than sanctioning Iran. Because of short-term, myopic political considerations, British companies are missing out on the opportunities being created". By contrast, he said, businesses in other countries - most notably China, India, Russia, Malaysia and South Africa - were set to exploit the opportunities on offer.

Nahavandian, with close connections in government circles, made his argument about the need for UK business investment at a meeting with Sir Peter Ricketts, head of the UK diplomatic service. The FT quoted a Foreign Office spokesman as saying there was nothing unusual in Sir Peter's decision to meet Nahavandian - given that London had diplomatic relations with Tehran. The spokesman said there was no chance of the UK-Iranian business relationship flourishing while Iran pressed ahead with a uranium-enrichment programme, which Tehran says is for peaceful energy production but which many Western states suspect is aimed at developing nuclear weapons.

The spokesman said: "We have always been clear that we want the bilateral relationship to be on a better footing, including economically. But Iran knows what it has to do to make that happen. International confidence in Iran's intentions needs to improve".