How a nuclear deal could open the door to US investment in Iran

In Abu Dhabi on 16 May, US President Donald Trump made a series of statements indicating the potential for a resumption of Iran-US bilateral trade.

“Iran wants to trade with us, OK? If you can believe that I’m OK with that,” the US President stated, speaking to Fox News. Crucially, he added that Washington is “using trade to settle scores and to make peace”. 

These statements come against the backdrop of ongoing Iran-US nuclear talks, which Tehran has entered with the expectation of some degree of sanctions relief.

It is anticipated that should a new deal be signed, several nuclear-linked US secondary sanctions, which target non-US personnel and entities that trade with the Islamic Republic, will be lifted.

However, Donald Trump’s recent statements on potentially trading with Tehran have bolstered speculation that a new nuclear deal could see Washington lift some primary sanctions on Iran, allowing US firms to re-enter the Iranian market.

This is not the first time that the prospect of removing primary sanctions on Iran has been alluded to since Iran-US talks began in April.

Following the second round of negotiations held in Rome with Omani mediation, the Omani Ministry of Foreign Affairs issued a statement emphasising that US and Iranian representatives are discussing a deal which would see Iran “completely free of nuclear weapons and sanctions”.

Speaking to The New Arab on the potential for a renewed Iran-US economic relationship, Javad Heiran-Nia, Director of the Persian Gulf Studies Group at the Centre for Strategic Research and Middle East Strategic Studies, stated that “establishing a legal framework and lifting primary sanctions could open the doors to economic cooperation between Iran and the US”. 

Heiran-Nia added that key sectors that could benefit from US investment include energy, mining, technology, and communications, as well as Iran’s automotive industry.

A potential enactment of a “trade for peace” framework by President Trump stands in contrast to the stance of previous US administrations. Tehran’s economic overtures to Washington, which began in the 1990s, have often been poorly received.

In 1995, then Iranian President Hashemi Rafsanjani offered US firm ConocoPhillips Iran’s first post-revolution oil field development contract. In response, the Clinton administration blocked the deal and later imposed a “total trade and investment embargo on Iran”.

Even after the landmark Joint Comprehensive Plan of Action (JCPOA) - also known as the Iran nuclear deal - was signed, several US primary sanctions remained in place, limiting American access to the Iranian market.

Ongoing US hesitance to bolster economic ties with Iran, even after the signing of the JCPOA, is borne primarily out of Washington’s opposition to other “malign” elements of Iranian foreign policy, among them Tehran’s use of non-state actors to pursue its geopolitical objectives in the Middle East.

The prospect of American investment in Iran was once again raised by Tehran in advance of the onset of the ongoing US-Iran talks. In early April, Ali Larijani, Advisor to the Iranian Supreme Leader, floated the idea by calling on President Trump, whom he described as a “talented individual who has managed to become wealthy through business”, to “define mutual economic interests with Iran”.

Following this, Iranian Foreign Minister Abbas Araghchi published an Op-Ed in the Washington Post clarifying the “serious misconception” in the US that “Iran is a closed economy”.

Finally, on 9 April, when the first round of indirect US-Iran talks was held in Muscat, Iranian President Masoud Pezeshkian stated, “the Supreme Leader [Ali Khamenei] has no objection to American investors in the country. Let them come invest”.

Tehran’s offer is indicative of an awareness that the prospect of a US entry into the Iranian market could accelerate the signing of a new nuclear deal, and crucially for Iran, expedite sanctions relief. However, the idea of allowing the US access to the Iranian market remains controversial among much of Iran’s more conservative power circles.

While Iran has 12 million iPhone users, and 50 million active social media users, Western social media applications such as Facebook, Instagram, and X remain banned in the Islamic Republic, partially due to a belief in some conservative circles that Western states leverage these sites to influence domestic developments in Iran, and further “Americanise” Iranian society. 

Locating this phenomenon within the context of the ongoing US-Iran talks, Mona Rahmani, an expert on Iranian business affairs stated: “The inevitable domestic political battle between the conservatives and progressives will not grapple with whether to make a deal this time, rather where the line lies - what is going too far, risking too much in return for social and economic relief.”

As such, the trajectory of an Iran-US economic relationship, should it emerge, will in part be shaped by where Tehran decides to draw these lines.

Even if a deal can be reached in 2025 which sees the Oval Office happy to greenlight US investment in Iran and see Tehran welcoming US investment in certain sectors, the procedural complexities of sanctions withdrawal could slow the trajectory of a nascent Iran-US economic relationship.

While sanctions enacted by presidential order can be removed directly by the US president, the removal of others would require an act of Congress. As such, the Trump administration would need to engage in complex political bargaining to see several key primary sanctions on Iran removed. 

The complexity of the factors underpinning the trajectory of a potential Washington-Tehran economic relationship suggests that Iran is unlikely to witness an influx of US investment in the short term. However, the entry of a few US firms into the Iranian market could have second-order benefits for Tehran’s trade relationships with other Western states. 

“The Iranians want to see the removal of primary sanctions, not because there will be an influx of US investment into the country, but because the entrance of a handful of US firms into the Islamic Republic is a green flag for Europe to re-enter the Iranian market,” Ali Ahmadi, Director of Geoeconomics at Reshape Risks, told TNA.

While the signing of the JCPOA in 2015 and the subsequent lifting of many nuclear-linked US secondary sanctions allowed European firms to re-establish a foothold in Iran, many European firms and banks remained hesitant to engage with Tehran, primarily out of well-founded concerns that the nuclear deal would prove short-lived.

“If American companies invest in Iran, they could use their lobbying in Congress to strengthen this new nuclear deal, should there be one,” Giorgio Cafiero, Head of Gulf States Analytics, told TNA.

As such, it is plausible that the removal of some primary sanctions and the entrance of a handful of US investors into Iran could increase Europe’s confidence that a second nuclear deal could prove more durable than the first.

Zahra Ladha is a geopolitical analyst focused on Iran, Iraq and transnational Shiaism. Zahra holds an MSc in Middle Eastern Studies from the University of Oxford