Investing responsibly in Iran – is this possible?

Everywhere in Tehran, façades are emblazoned with giant murals by the internationally renowned artist Mehdi Ghadyanloo: Heavenly idylls, kitschy representations of martyrs and surreal motifs, commissioned by the Tehran Beautification Organization to conceal the grime on the façades of buildings.
Article as analysis
Enterprises must respect human rights, including when investing abroad. What should Switzerland's role be in opening up Iran, the investor El Dorado?

Since the 2015 signing of the nuclear agreement with Iran in Lausanne (Switzerland), western business delegations have been coming and going in Teheran, including Swiss delegations. No quick deals have in fact been closed, but the re-election of the reformer Hassan Rohani as President is keeping hope alive – including among the majority of Iranians.

A country with huge endowments of largely untapped mineral resources and a well-educated population of 80 million is a very promising market. In 2016, Switzerland's trade volume with Iran was CHF 517 million; exports were 496 million and imports 21 million. Yet Swiss enterprises, especially banks, are still hesitant to invest in the land of the mullahs. This is due to the continuing reluctance of the USA to lift the sanctions on Iran. Banking majors Credit Suisse and UBS insist that so far they still have no business ties with Iran. In contrast, Vitol,[1] the world's biggest oil trading company, domiciled in Switzerland, provided a USD 1 billion loan in euros to National Iranian Oil in January 2017.[2] Future exports of refined petroleum products will serve as collateral.

Human and labour rights, environmental standards

First of all, most foreign investment runs counter to the Sustainable Development Goals as it goes to the oil and natural gas industry. Representatives of Iranian minorities point out that investments strengthen the hand of the current regime rather than benefit the local population. On a visit to the Parliament in Berne they called for a total halt to investments in Iran, or at least insistence on respect for human and labour rights as well as compliance with environmental standards. That is much easier said than done, as the challenges are considerable:

  • There is hardly any protection of personal privacy on the Internet in Iran. The safety of anyone having to do with IT for professional purposes is potentially at risk.
  • Child labour is widespread, affecting an estimated 3 million children.
  • Sexual harassment is rarely persecuted, but is extremely commonplace in the world of work.
  • Occupational safety is precarious. According to the Iranian Legal Medicine Organization, between May and July 2015, 650 people died from occupational accidents, 10,109 were injured and the estimated number of unknown cases is possibly much higher. No legal protection is available in Iran to workers who refuse to work under dangerous conditions. Fatal occupational accidents are eight times more frequent in Iran than the global average.
  • Further reason for disquiet is the scale of discrimination at the workplace. The Gozinesh Law prohibits women, religious and ethnic minorities as well as opponents of the government from accessing certain professions. Of the 3 million Afghans who have fled to Iran, two-thirds are in the country illegally and are therefore subject to exploitation and discrimination.
  • Half the Iranian population belongs to a minority that suffers discrimination. In Kurdish regions, for example, joblessness is higher, the standard of living is lower, access to education is limited, and infrastructure and basic supplies are inadequate. Foreign investment is concentrated in Teheran – and it would therefore be crucial also to create jobs in regions where minorities live, based on agreed quotas.
  • Corruption is rampant. The 2016 Transparency International Index ranked Iran 131st among 176 countries.
  • Trade union rights are not respected and independent worker representation is forbidden. No law protects workers from abuse, discrimination or harassment. They have no protection against dismissal, and no right to strike. Anyone who refuses to work risks being whipped. Trade union leaders are regarded as enemies of the State and are frequently imprisoned.
  • The rule of law is weak, there are arbitrary arrests, and neither freedom of expression nor of assembly is guaranteed. The justice system is not independent.
  • Prestige government projects entail illegal expropriations and forceful evictions.
  • The environment is highly endangered. According to Issan Kalantari, a former Agriculture Minister, Iran is headed for an environmental disaster owing to the worsening water shortage. Air pollution and desertification too are problems that could be further exacerbated by foreign investment.
  • Lastly, it can be extremely difficult to find reliable business partners, as Iran's leadership structures are opaque, and individual dialogue partners may still be vulnerable to sanctions.

Switzerland's responsibility

In sum, this is a precarious situation, which the religious establishment – the real power brokers in Iran – do not seem about to change in any significant way. And the mullahs do not tolerate a civil society that can be seen and heard to be advocating for change.

In the circumstances, countries of origin must demand special responsibility on the part of investors, as called for in the UN Guiding Principles on Business and Human Rights. In its National Action Plan (NAP) of 9 December 2016 for the implementation of the Guiding Principles, the Federal Council underlines that it requires enterprises to respect human rights not only in Switzerland, but wherever they are active. Yet the NAP makes no mention of any specific measures through which the Federal Council plans to ensure that the concerned enterprises truly live up to their responsibility.

Alliance Sud urges the Federal Council to use binding measures to ensure that Swiss enterprises fully respect human rights and environmental standards, especially by firmly establishing the principle of due diligence, which can be broken down into three stages:

  1. Identifying potential for human rights violations
  2. Taking preventive and remedial action
  3. Reporting

The Federal Council should first and foremost raise awareness on the part of Swiss business as to the human rights situation in Iran. When conducting dialogue with problematic regimes regarding freedom of expression and capital punishment the Federal Council should also raise the question of business and human rights. Other countries are already doing so. And lastly, the question arises as to what contribution Switzerland is making – particularly when Swiss investors are involved – to greater respect for human rights, specifically including international labour rights standards.

[1] Sales of US$152 billion in 2016