Iran International
Iran has indicated a willingness to open its markets to American investors if a nuclear deal is reached, but some experts argue that expecting not only US investment but any significant foreign investment is highly unrealistic.
“Speaking of a trillion-dollar investment from the United States is nothing but a dream and fantasy,” said Ferial Mostofi, head of the Investment Services Center at the Tehran Chamber of Commerce, in an interview with Shargh daily. “How can we expect foreign investors to come to Iran when domestic investors move their capital out of the country?”
In its article titled “Foreign Investment: Mirage or Reality?”, Shargh referred to a claim circulating in Iranian circles that Tehran is seeking an agreement with the United States to guarantee $1 trillion in US investment over twenty years. “This claim means the United States would have to invest $50 billion in Iran annually.”
Shargh also recalled past official claims that China had pledged $400 billion in investments in Iran’s oil, gas, petrochemical, and transport sectors, while Russia’s Gazprom was expected to invest $40 billion in Iran’s gas industry. The article pointed out that none of those promised investments ever materialized.
“[A trillion-dollar US investment] is exactly like the much-discussed $400 billion investment from China [over twenty-five years],” the article said, arguing that China has not—and likely will not—invest such a large sum in Iran due to several factors, including inadequate hard infrastructure in transportation and energy, lack of transparency, and political risks.
Iran is in urgent need of foreign investment to revitalize its aging oil and gas infrastructure and to support other key sectors, including its large but struggling automotive industry.
According to the 2024 report of the UN Trade and Development (UNCTAD), Iran attracted $1.4 billion in foreign direct investment (FDI) in 2023. The meager figures stood at $1.5 billion in 2022 and $1.4 billion in 2021. The highest recorded FDI level was over $5 billion in 2017, following the implementation of the 2015 JCPOA nuclear deal which lifted UN economic sanctions against Iran.
President Masoud Pezeshkian said recently that Supreme Leader Ali Khamenei has no objection to American investment in Iran. Foreign minister Abbas Araghchi, writing in a Washington Post op-ed, put the onus on Washington to allow American companies to access what he described as a “trillion-dollar opportunity” in Iran. Neither Pezeshkian nor Araghchi provided specific details.
The Revolutionary Guards (IRGC) linked Javan newspaper appeared to support the idea of American investment in Iran in an article it published one day before the first round of Tehran-Washington talks in Muscat on April 8. “It is possible that we accept that some American companies have the opportunity to invest or sell their products, if Iran's economic interests are met. If sanctions are lifted, these companies will be eager to invest, and Iran will be unlikely to object.”
However, any American investment in Iran would require the removal of at least some of the primary US sanctions, many of which predate the nuclear-related sanctions.
While Khamenei has not officially banned American or other foreign investment, he has consistently advocated for stronger economic ties with Eastern countries such as Russia and China, expressing deep mistrust toward the West.
Despite publicly distancing himself from economic policymaking, Khamenei is widely believed to exert substantial control over Iran’s economy through political influence, economic entities under his authority, and the IRGC’s involvement. In one notable instance, he banned imports of South Korean electronics brands LG and Samsung in August 2021 to pressure Seoul over Iran's frozen funds.
According to data from the Parliament Research Center, between the establishment of the National Development Fund (NDF) in 2011 and March 2024, about 82% of its $161 billion in revenue has been spent. Notably, 88% of the loans disbursed by the fund went to the government and public institutions, including the Islamic Revolutionary Guard Corps (IRGC). In effect, a fund intended as a savings mechanism for oil revenues has instead served as a financial lifeline for inefficient state entities.
Of the $132 billion in loans disbursed over the past 13 years, only $8 billion has been repaid, while $18 billion is past due and classified as non-performing.
The report also reveals that as of March 2024, the fund’s foreign exchange reserves had fallen to just $26.5 billion. After accounting for $6.5 billion in outstanding obligations, only $20 billion remains in accessible assets.
The NDF has yet to release its financial report for the past fiscal year, which ended on March 20, but investigations by Iran International indicate that the government borrowed at least $10 billion from the fund last year. This borrowing occurred either directly through authorization from Supreme Leader Ali Khamenei, or by seizing a portion of the fund’s share from oil export revenues as permitted by the national budget law.
Under the current fiscal year’s budget, the government is also set to borrow at least $9.4 billion out of the fund’s projected $16 billion in oil revenue.
The fund was established 14 years ago to save a portion of Iran’s oil revenues and provide loans to the private sector, replacing the former Foreign Exchange Reserve Account. However, in practice, the government and military forces took control of most of its financial resources. Only $14 billion—less than 10% of the fund’s assets—was allocated to the private sector. Given the extent of corruption and cronyism, it is unlikely that these resources reached the true private sector.
If no further unexpected withdrawals are made by the government this year, the total state debt to the fund, or spent money, will reach $125 billion by the end of the year.
The critical issue is that the Iranian government lacks the financial resources to repay its debts, and the NDF is now attempting to offset part of the government’s liabilities by investing in oil fields and selling crude oil directly. This approach not only contradicts the fund’s original purpose, but it could effectively cut the government off from its own oil export revenues.
In the past few months, the government has projected daily oil exports of 1.5-1.8 million barrels, one-third of which is to be handed over directly to military institutions. If the NDFI also becomes a direct oil exporter, the government’s role in oil exports will be further marginalized.
Situation in Neighboring Countries
While the NDF’s manageable assets have fallen below $20 billion, data from the Global SWF Institute indicates that the total reserves of oil-related sovereign wealth funds in the Persian Gulf countries and Azerbaijan have surpassed $3.6 trillion. In addition to this, these states also possess a similar amount in other sovereign wealth funds.
For example, the United Arab Emirates manages eight sovereign wealth funds with total assets of $2.3 trillion. Among them, only the Abu Dhabi Investment Authority (ADIA) is oil-funded, with more than $1.1 trillion in assets.
Beyond the $6.7 trillion in sovereign wealth fund assets—whether linked to oil or not—public pension funds in these oil-rich neighboring states also hold around $650 billion in capital. In contrast, Iran’s public pension funds have been effectively bankrupt for years, surviving only through annual government budget allocations.
Moreover, the foreign currency reserves of the central banks in the Persian Gulf Arab countries exceed $850 billion, whereas, according to the Global SWF Institute, Iran’s Central Bank holds just $25 billion in reserves—most of which has been lent to the government and domestic banks in the form of loans and credits.
While the National Development Fund accounts for less than 0.5% of the region’s sovereign wealth fund assets, Iran possesses the second-largest oil reserves in the region after Saudi Arabia and ranks first in natural gas reserves.
Iran also has the third-highest oil production in the region after Saudi Arabia and Iraq, and it is the largest producer of natural gas in the Middle East.
Decades of flawed policymaking, rampant corruption, and the plundering of national wealth—combined with the impact of international sanctions—have steadily crippled Iran’s financial institutions.