How Trump Can Strike Gold for America in Iran
There is a curious line in the Omani statement issued following the latest round of nuclear negotiations between the United States and Iran in Rome, which concluded on Saturday. The statement declares that Iran’s foreign minister, Abbas Araghchi, and Trump’s special envoy, Steve Witkoff aim to “seal a fair, enduring and binding deal which will ensure Iran [is] completely free of nuclear weapons and sanctions.” The sentence is striking because it implies that the US is considering lifting primary as well as secondary sanctions, something that goes beyond the sanctions relief provided under the Joint Comprehensive Plan of Action (JCPOA).
Is this just a case of sloppy drafting by the usually diligent Omani mediators? Well, the Wall Street Journal has reported that Iran has offered Trump a high-level meeting in Washington if a deal can be reached, something that would be difficult to imagine if Iran were to remain under an effective US embargo after the deal’s implementation.
Iranian officials have certainly been touting the possible economic benefits of a renewed nuclear deal for the US. When Araghchi described Iran as a “trillion-dollar opportunity” in a recent op-ed, he had one investor in mind—Donald Trump. As the US and Iran take further steps in the nuclear negotiations, Iranian officials have been eager to make clear that agreeing a new nuclear deal, which would at a minimum require the US to lift secondary sanctions on Iran, could prove a boon not just for the Iranian economy but also for the American economy. To emphasize the point, Iranian President Masoud Pezeshkian even announced that Iran’s Supreme Leader, Ali Khamenei, has “no objection” to American investment in Iran—an attempt to conjure a positive atmosphere ahead of the first round of indirect talks between Araghchi and Witkoff in Muscat.
It remains unclear whether the Trump administration will be able to achieve a viable deal with Iran. The administration’s position on key issues, such as Iran’s ability to maintain uranium enrichment, remains ambiguous, and there is significant distrust on both sides. If the negotiations are to succeed, they will need to find a win-win formula—hence the Iranian insistence on portraying any new agreement as not just a nuclear deal, but also a business deal. Iranian leaders have been watching Trump’s recent moves—his aggressive use of tariffs, his imposition of a critical mineral deal on Ukraine—and they have smartly concluded that Trump cares more about American enrichment than Iranian enrichment.
Is Iran really open for American businesses? The answer is yes, especially if Iranian and American policymakers make the restoration of their bilateral economic relationship a priority alongside restoration of a nuclear deal. Lifting primary sanctions would have a dramatic impact on US-Iran economic relations. But even if those sanctions remain in place, there are ways in which the US and Iran can structure their bilateral economic relations, opening new channels for trade and investment.
The heyday of US-Iran economic relations dates to the 1960s and 1970s. American firms like General Electric, General Motors, and DuPont played a central role in Iran’s industrialization, helping the country’s oil and manufacturing sectors achieve global prominence. Consumer brands like Gillette, Colgate, and Coca‐Cola were beloved by Iranian households.
The 1979 Islamic Revolution brought an end to diplomatic relations between the United States and Iran. That year, the US imposed sanctions targeting the Iranian economy for the first time. The New York Times reported on the exodus of American firms from Iran with a report titled, “Iranian Festival Is Over For American Business.”
But the change in Iran’s geopolitical and ideological orientation did not change a basic economic reality—the 1990s were an era of unipolarity and it was prudent to do business with the world’s largest economy. Iranian President Hashemi Rafsanjani tried to rekindle economic relations with the United States, believing that higher levels of trade and investment would help restore relations between the two countries. He offered the Islamic Republic’s first post-revolution oil field development contract to ConocoPhillips, maneuvering around domestic opposition to the deal. But the deal was blocked by the Clinton administration, which subsequently tightened US sanctions on Iran. The episode served as an early warning that the hardliners most capable of thwarting diplomacy were those in Washington, not Tehran.
American firms maintained a small presence in Iran in the early 2000s while European firms emerged as Iran’s preferred partners. The Europeans established joint ventures and wholly owned subsidiaries in the country and did brisk business. French oil giant Total took over the deal first offered to Conoco-Philips. French and German automakers retooled the Iranian automotive industry, making it one of the largest in the world. European brands flew off supermarket shelves as Iranian household purchasing power recovered on the back of 16 consecutive years of economic growth.
Iran’s economy hit a stumbling block in 2012 as the international community tightened international sanctions—with the measures hinging on President Obama’s unprecedented package of financial sanctions imposed at the start of that year. Subsequent nuclear negotiations focused on restoring Iran’s trade and investment ties with Europe, but the Obama administration did understand that enabling more trade between the US and Iran could create broader constituencies in Washington who backed the JCPOA, which was implemented in January 2016.
While primary sanctions remained in place after implementation of the deal, the JCPOA opened three pathways for US business that wished to pursue opportunities in Iran. First, certain US companies were able to apply for specific licenses from the Office of Foreign Asset Control (OFAC), part of the Treasury Department, permitting deals that would otherwise be blocked by primary or secondary sanctions. Among the contracts licensed in this way were the roughly $20 billion in deals Boeing negotiated for the sale of commercial aircraft to Iranian airlines, contracts that became symbolic of the nuclear agreement’s broader potential.
Many American companies took advantage of General License H, which stipulated that non-US subsidiaries of US companies could broadly engage with the Iranian economy. For example, Procter & Gamble, which ran its Iran operation out of its Swiss subsidiary, rapidly re-entered the Iranian market, where it could reliably generate over $100 million in annual revenue. American technology companies took advantage of a similar license called General License D-1 to export digital services to Iranian users.
Finally, American companies were even able to export to directly Iran without relying on a licensing regime if their sales were consistent with longstanding exemptions for humanitarian trade. Medical device companies like GE Healthcare and Baxter enjoyed bumper sales to Iranian hospitals. Pharmaceutical giants like Eli Lilly and Pfizer also increased sales, taking advantage of an opening in financial and logistics channels. American commodities giants like Cargill and Bunge sold wheat, sugar, and soybeans to Iranian buyers, including crops grown on American farms.
In short, American companies were making inroads in Iran as recently as eight years ago. It was President Trump’s unilateral decision to exit the Iran nuclear deal and reimpose secondary sanctions that brought an end to these renewed economic relations, leading to the cancellation of billions of dollars of contracts.
Immediately after Trump’s election, Boeing began to lobby the administration not to withdraw from the JCPOA—something Trump had promised to do on the campaign trail. The planemaker argued that the huge Iran contracts supported “tens of thousands of US jobs” and tried to appeal to Trump’s interest in reviving American industry. The appeals did not work. But it is easy to imagine Trump grasping benefits of a massive Boeing deal at this juncture, given the how darling of American industry has lost its shine. Demand for aircraft in Iran could also help compensate for the impact of Trump’s new China trade war on Boeing. Earlier this week, China banned the purchased of American aircraft, putting hundreds of Boeing orders in doubt.
The JCPOA experience makes clear that there was no prohibition in Iran against doing business with US companies. In fact, relations with the US nosedived after Trump’s abrogation of the nuclear deal, but some direct economic links persisted. Iran offered a lifeline for many American soybean farmers who were hammered during Trump’s first trade war with China. When China retaliated by ending the import of American soybeans, crashing the price, Bunge stepped in, delivering multiple cargoes of American-grown soybeans to Iran, even as Trump brought secondary sanctions back in force.
Clearly, a new nuclear deal could rekindle US-Iran economic relations. But the rebound in trade and investment will likely be modest unless there is a concerted effort by both the American and Iranian governments to make deeper economic relations a cornerstone of a new deal—especially if primary sanctions remain in force. Most American firms will be wary about entering the Iranian market given the inherent concerns that any deal between the two countries could break down, leading Trump to reimpose sanctions once again. Companies are also increasingly risk averse in the face of a volatile global economy. Leaving it to the private sector to singlehandedly realize the economic opportunities of the nuclear deal, the strategy taken back in 2016, is unlikely to work. Bilateral trade may rise from its low base, but investment will not materialize given risk perceptions, meaning there will be little in the way of shared incentives to bind the US and Iran together. A more structured plan for cooperation is needed.
Iranian negotiators are seeking structured cooperation, although their vision remains somewhat ill-defined. Reprising a demand from the talks that were undertaken with the Biden administration, Iranian negotiators continue to target some form of “guarantees” that would ensure the US cannot easily and costlessly withdraw from the nuclear deal while Iran remains in compliance with its obligations. Political and legal guarantees will have little weight. But deeper US-Iran economic cooperation can act as a kind of “technical guarantee” that serves to increase the credibility of the long-term commitments enshrined in any new nuclear deal.
Trump’s turn towards a decidedly “America First” economic policy might actually help Iran as it tries to find a win-win formula for economic cooperation that goes beyond increased purchases of American consumer goods, pharmaceutical products, and agricultural commodities. As economist Djavad Salehi-Isfahani has recently detailed in a review of investment data, Iran desperately needs to renew its capital stock and reverse a decade of technological regression. Meanwhile, the US is trying to rekindle domestic manufacturing of capital goods. The interests align nicely.
The economic commitments related to any new US-Iran nuclear deal should be structured to enable Iranian industrial giants to make major purchases of American-made capital goods—machinery, equipment, aircraft, and vehicles.
Iran’s capital stock is primarily European and was installed around 20 years ago, when European firms were making major investments in the country. But a significant portion of this machinery remains American in origin or design—a reflection of the fact that large parts of Iran’s industrial sectors have not been updated since the 1970s. Many turbines spinning in Iranian power plants and diesel locomotives chugging on Iranian rails are based on GE designs. Many drill heads used to bore oil wells are derivatives of Schlumberger designs—the Texas company’s former Iran subsidiary lives on. Another former American subsidiary, Iran Combine Manufacturing Company, was once called “Iran John Deere.” The company continues to produce trademark green and yellow tractors and combine harvesters—using American designs from 50 years ago. American engineers will find familiar technologies in use at Iranian industrial plants. Renovating and upgrading these facilities will be straightforward, especially given the incredible acumen of Iranian industrial engineers and technicians who will be eager partners.
Importantly, a surprisingly small portion of Iran’s capital stock is Chinese. Chinese exports of capital goods to Iran totaled $6 billion in 2023. But this is the same level as achieved in 2017, the last year that Iran enjoyed sanctions relief. Meanwhile, Chinese investment in Iran has languished under sanctions, plateauing since 2014. There are no major Chinese manufacturing investments in the country and Iran has not been able to substitute the loss of its European industrial partners with Chinese partners. That leaves a uniquely large and open market for American exporters—perhaps the last major economy in the world where the US could reasonably overtake China as an industrial partner.
Given the aligned interests of their respective industrial policies, the US and Iran should think ambitiously about the scope of their economic relations. Iranian firms will be eager customers for new machinery and equipment. Crucially, this kind of trade does not make Iran dependent on the US. Rather, it restores the strength and resilience of the Iranian industrial sector. Once capital goods are installed, they can last for decades—a kind of guarantee that the benefits of a US-Iran deal will last.
Finally, Iranian purchases of American equipment must be financed by American banks. This will make it more likely that the financial logjams associated with JCPOA sanctions relief will be solved. If US banks do business with Iran on Trump’s instructions, global banks will follow. Notably, Trump’s efforts to revitalize the Export-Import Bank could give American exporters access to crucial export credit, insurance, and guarantees.
Trump loves gold. If he remains pragmatic and focused when it comes to Iran, he could strike gold in several ways. He could forge the kind of nuclear deal Thomas Pickering once called the “gold standard for non-proliferation agreements,” once again subjecting Iran to the strictest IAEA verification regime ever devised. He could earn billions in export revenue for the US—and given the US is unlikely to import much Iranian oil—generate a rare trade surplus with a country that is poised to return to its position as one of the twenty largest economies in the world. Finally, if Trump is ambitious and if Iran’s leaders are courageous, he could finally earn the gold medal he has always wanted—a Nobel Prize.
Photo: The White House
