Latin America Advisor

A Daily Publication of The Dialogue

Are Iran Trade Ties Important for Latin America?

Global powers in January lifted crushing economic and financial sanctions placed on Iran over its nuclear program, opening doors to a market with nearly 80 million consumers and years of potential pent-up demand for products and services. Are the countries of Latin America and the Caribbean well positioned to take advantage of Iran’s potential as a market and trading partner? What kind of impact would more trade with Iran have on the region as a whole? Will more traditional trading partners with Tehran such as China, India and Turkey shift focus there instead of recently announced efforts to court Latin America? How do Iranian-Latin American ties play into the broader global geopolitical dynamic moving ahead? Is Iran still a threat to U.S. interests?

Alex Vatanka, senior fellow at the Middle East Institute: “The lifting of nuclear-related international sanctions on Iran has already led to a flurry of high-profile visits by foreign political and commercial dignitaries. But the Latin American countries have not been among the prominent visitors to Tehran. At least not yet. There are a couple of main reasons. First, President Hassan Rouhani’s government is focused on first cultivating strategic allies that can assist Tehran toward two main goals: To help lessen Iran’s diplomatic isolation on the international stage; and to be powerful commercial partners both in terms of investing in Iran’s critical industries—such as the oil and gas sector—and as export markets for Iranian goods. Unsurprisingly, countries such as Germany, France, Italy, China, Japan, Russia and South Korea have been the key targets for Iranian overtures. Closer political ties with these states will no doubt create goodwill toward Tehran, which the Rouhani government hopes will make it harder in the future to isolate Iran the way the country became isolated in the last decade as its nuclear program mobilized world opinion against it. Latin American countries, particularly Brazil and Argentina, are important in their own way but simply too far away to become first-tier priorities in Tehran at this moment. Rouhani is after foreign policy success that can be quickly and tangibly measured. Unlike his predecessor, Mahmoud Ahmadinejad, Rouhani is not captivated by some of Latin America’s anti-American voices. Symbolic political platforms, such as the common Hugo Chávez and Ahmadinejad anti-Americanism, hardly create jobs inside Iran nor do they strengthen Tehran’s overall international diplomatic standing. Unlike Ahmadinejad, whose government earned around $650 billion in oil revenue from 2006 to 2013, the Rouhani government is cash-poor and needs to be very deliberate about where it invests in its foreign policy. And for his re-election in 2017, he has clearly tied his foreign policy agenda to improving the economy. As the more pressing economic problems have been tackled, Rouhani will most likely devote more time and energy toward establishing closer ties to Latin American nations, but unlike Ahmadinejad, he is after measurable progress in relations and not just photo opportunities.”

Ray Walser, co-chair of the Western Hemisphere working group at the John Hay Initiative: “The lifting of sanctions and the windfall of as much as $100 billion in released assets affords Iran a unique opportunity to play a more active role in the global economy. But Latin America shouldn’t count its chickens, just yet. While Iran’s economy is among the world’s top 20, on par with Australia or Taiwan, as an import market it is closer to Romania or Finland. Not exactly an economic giant. Trade with Latin America, primarily Argentina and Brazil, accounts for less than 6 percent of Iran’s total imports. An oil exporter, Iran suffers the impact of low energy prices. Its economy is marred by corruption, high unemployment and sluggish growth. The foreign investment climate is turbulent. Iran’s initial post-sanctions shopping list has focused on high-end European deals: airplanes, autos, energy, tourism and weapons. Iran’s quest for regional hegemony appears to take precedence over a global charm offensive. The Rouhani regime, apparent winners in recent legislative elections, has not replicated the pyrotechnics of Ahmadinejad’s in-your-face ‘Great Satan’ diplomacy. Fiery Hugo Chávez is dead; Venezuela slides toward economic meltdown; ALBA is ailing; and Argentina’s President Macri doesn’t share the Fernández de Kirchner zeal for enhanced Iranian ties. Broadly speaking, Iran’s relations with Latin America appear to be hitting the snooze button. We should not forget, however: Iran—the world’s leading state sponsor of terrorism—is no ordinary state actor. The anti-American mindset of the Ayatollahs and the Quds Force still matters in Tehran. Utilizing Latin America as a launching pad to attack American interests or its allies remains a contingent possibility. A major shift in U.S. policy after January 2017 could once more trigger concerns about the Iranian menace in the Americas.”

Stephen Johnson, regional director for Latin America and the Caribbean at the International Republican Institute and former deputy assistant secretary of defense for Western Hemisphere affairs: “The Latin America and Caribbean region is not a traditional trade partner for Iran. That said, Iran made important inroads in the mid-2000s, thanks to the efforts of Venezuelan president Hugo Chávez and Iranian President Mahmoud Ahmadinejad. Chávez was eager to befriend hardline anti-U.S. governments in the Middle East, and Ahmadinejad found Chávez to be a door-opener to leftist, populist governments that were being popped up in South America at the time. U.N., European, and U.S. sanctions generally restricted sharing nuclear technology, weapons sales and business dealings with entities that could aid terrorist groups or Iran’s military establishment. The United States tried to target Iran’s petroleum and gas industry, but Iran made efforts to become more self-sufficient and engaged Venezuela to help develop its fossil fuel industry. But that was then. Gradually, by 2010, Ahmadinejad’s critics at home felt Iran was getting the short end of the stick, investing in Venezuelan oil fields unlikely to produce, setting up car and cement factories that were mismanaged and getting little in return. Attempts to develop trade and stronger ties with Ecuador and Bolivia ran into complications. Oil exported to Nicaragua went unpaid. And efforts to improve relations with Argentina by participating in a ‘truth’ commission regarding the terrorist attacks of 1992 and 1994 ultimately went nowhere. Now global oil prices are much lower than they were in the mid-2000s, and the populist pendulum in Latin America is beginning to swing back. Threat of U.S. and multilateral sanctions regarding support for terrorism remain. That doesn’t leave Iran in a great position for developing strong trade ties in the Americas. Nonetheless, it can sell oil (albeit at lower market prices) to buy commodities (of which Latin America has plenty, thanks to a declining Chinese market). That may be a start, but Iran is largely self-sufficient in food production and trades mainly with the Middle East, Central Asia and China. That is unlikely to change. And to the extent Iran is hostile toward other nations, those states will consider it a threat.”

Douglas Farah, president of IBI Consultants: “Economic relations between Iran and Latin America over the past decade were predicated almost entirely on Iran’s desire to evade international sanctions by acquiring dual-use technologies and access to the world banking system. The actual trade figures with its allies in Venezuela, Ecuador, Bolivia and Argentina are all negligible despite the signings of dozens of memorandums of understanding and investment deals. None of the deals yielded results and most never materialized. Neither Iran nor Latin America have a comparative advantage in virtually anything else the other needs or wants. The true value of the economic alliances for Iran was access to Venezuelan and Ecuadoran banks to move money, access to regional free-trade zones to acquire banned goods, and the ability to acquire travel documents so Iranian intelligence operatives could travel undetected. The value to Latin America’s Bolivarian leadership was to show anti-imperialist solidarity with Iran, gain access to intelligence equipment and training and profit from Iran’s need to carry out covert sanctions-busting activities. With the sanctions lifted, the economic ties will likely not undergo a significant shift. Iran could access the wheat and beef markets of Argentina or Brazil, but will likely find it cheaper to shop closer to home. With Venezuela’s economic implosion and Latin America’s economic contraction, there will be little appetite for missions of economic solidarity that bring no real gains. The enduring value of the relationship is the embassies Iran has opened, the cultural centers it built as part of its intelligence infrastructure and political contacts made, all integral parts of Iran’s long-term strategic penetration of Latin America. Trade is no longer a necessary cover for those activities.”

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