In a cautiously worded speech at Columbia University on July 10, Iranian Foreign Minister Kamal Kharrazi declared his country's "religious democracy" was eager to promote trade and encourage regional friendships. He called on US President George Bush to move more aggressively to ease US sanctions, hinting that Iranian growth could help stimulate economic expansion throughout the Caucasus and Central Asia.
Kharrazi devoted his talk to defining "religious democracy," a theme that left some in the audience confused. The foreign minister endorsed Iranian trade with ideologically different regimes. That provides a model for self-styled religious democracies, such as Turkmenistan. It also suggests that Iran is ready, theoretically at least, to trade with secular nations. Kharrazi also said Iran was interested in bolstering economic ties with its neighbors, including Caucasus and Central Asian states. "We believe in regionalism," Kharrazi said.
Giandomenico Picco, a senior associate with the Eurasia Group, said after the speech that a prosperous region is a key to Iran's economic growth strategy. "The need to maintain good relations with neighboring countries has no price," said Picco, who mediated peace talks between Iran and Iraq.
But the vision for regional cooperation sketched by Kharrazi lacked specifics. Large obstacles stand in the way of Iran's regional goals. The country's own economic development needs are enormous. Given Iran's youthful demographic profile, substantial foreign investment is needed to satisfy job-creation demands. According to some estimates, up to 750,000 new jobs need to be created each year to employ young Iranians entering the workforce. An estimated two-thirds of Iran's population is under age 25. [For background see EurasiaNet's economic archives].
Western oil companies are already itching to get into Iran. Indeed, Chevron, Conoco and ENI sponsored Kharrazi's talk. Ultimately, oil and gas investments in Iran could benefit Central Asian countries. With better refinery capacity, Picco explains, Iran would have an easier time processing oil from Kazakhstan. And with more infrastructure for gas pipelines, it would be more likely to commission gas pipelines in Turkmenistan and Azerbaijan. The existing pipeline from Turkmenistan to Iran remains inactive, Picco says, because a Western company in charge of its completion is moving slowly in light of sanctions.
The persistence of US sanctions darkened Kharrazi's talk. He described the US Congress' extension of investment restrictions as a "negative signal" and declared himself disappointed. "The government could work more seriously to change," he said. He specifically pressured President Bush, who has often tried to please big oil interests, to attack the sanctions. Certainly, companies like Conoco and Chevron seem keen on investing as much as they can in the country. Western companies' interest in Iran "cannot be ignored," Kharrazi said, seeming to goad the Bush administration.
Kharrazi managed to ignore specific investment opportunities in Central Asia, with good reason. U.S. policy remains such a steep obstacle to Iranian economic progress that it's hard to see around it. The pace at which that obstacle shrinks in the next several months will go a long way toward determining whether Iran can pull up itself and its neighbors.
Alec Appelbaum is a contributing editor to EurasiaNet.