Iran’s London Charm Offensive Clouded by Wariness Over Sanctions

  • Companies reluctant to invest as some U.S. curbs remain
  • Central bank, Euromoney host conference to understand issues

London’s financial elite will listen to Iran’s central bank chief on Thursday as the Persian Gulf nation seeks to break a deadlock in investments caused by the few remaining U.S. sanctions.

While the lifting of most curbs after the country’s nuclear deal with world powers last year is luring some smaller money managers, most investors are staying away from the market of 80 million consumers as they remain doubtful of Iran’s ability to protect their investments. To win back their trust, Tehran is sending 50 policy makers and finance executives to meet their European counterparts at the first ever Euromoney conference dedicated to the country.

QuickTake Iran's Economy

At stake is the restarting of investment flows into a $417 billion economy that the IMF forecasts will grow 4 percent this year. But persuading investors to overcome their inhibitions may be a challenge for Governor Valiollah Seif and his colleagues. European businesses are wary of international sanctions that haven’t yet been removed, from a ban on American commerce with Iran to restrictions on dollar-denominated trades.

“The question is how much money would they possibly make in Iran that could outweigh running into breach of those still existing U.S. sanctions,” said Charles Robertson, the London-based global chief economist at Renaissance Capital Ltd., which conducts economic research on Iran and other emerging markets. “The answer from most investors so far is it’s not worth it.”

Those who have invested in Iran this year are cashing in on a post-deal rally. London-based money manager Charlemagne Capital Ltd. partnered with a Tehran firm to buy stocks and local-currency Iranian bonds that yield more than 20 percent. The Tehran Stock Exchange welcomes foreign investment, with some shares allowing as much as 100 percent ownership from investors abroad. The country’s main index has gained 24 percent this year, compared with little change in the MSCI Emerging Markets Index.

The Euromoney conference will facilitate a discussion on “the key hurdles and challenges to overcome in order for Iran to regain its position in the international banking and financial community,” according to the official website. Besides Seif, senior officials including Hassan Ghalibaf Asl, the chief executive officer of Tehran Stock Exchange, will also speak.

About 300 delegates, including the likes of Lombard Odier Investment Managers and Sumitomo Mitsui Banking Corp., will seek clarity from Iranian officials on how the country’s financial institutions left impaired by the decade-long exile are being mended. One of their chief concerns is the lack of a global custodian for the safekeeping of stocks and bonds, given their lack of confidence in the local alternative.

“We don’t invest in Iran at the moment,” Michael Levy, a London-based frontier markets fund manager at Barings Plc, which oversees $35.4 billion in its asset management business. “The legal infrastructure and custody is not well defined enough to ensure safe custody of assets.”

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