Fifty years ago, he had just attended a conference in Tehran. He loved it — as did his fellow delegates. In a note afterwards, he wrote of their “surprise with the striking contrasts” all over the city, noting the “watermelon stalls on one side of the road” with “new factories for assembling Leyland lorries and Mercedes ‘buses’ on the other”.

He was impressed by Iran’s firm sense of nation, its pride in its ancient civilisation, and the “the stability and continuity provided by the personality of the Shah”. He noted Iran’s steadily improving relationship with the Soviet Union and eastern Europe and the growing ease with which companies — and car companies in particular — could do business in Iran.

Tehran, he reported, was a “Mercedes museum” in that “almost every model ever produced was on the streets”. Leyland had “established a strong and flourishing bridge head”; British double-deckers looked “surprisingly at home under the blue skies of Tehran”; and a new factory was being set up to produce 7,000 Rootes Group saloons a year (Rootes was a UK car manufacturer that had disappeared into Chrysler by the end of the 1960s).

Anyone who thought that Iran was “ripe for revolution” was just wrong, said Mr Bruce-Gardyne. He even dared to hope that “the example of Persia’s prosperity through stability might even prove infectious” in the region.

Forecasts made about the Middle East tend to be even riskier than those made about regions elsewhere. And Mr Bruce-Gardyne was of course wrong on every single point.

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Since the country approved its theocratic-republican constitution in 1979 there has been less “prosperity through stability” than anyone at the 1966 convention might have expected. But could it now return? The end of the sanctions against Iran (at least by the EU and the UN) and the results of recent elections show the reformers have made gains.

Interest in the country has soared: there are conferences aplenty both here and there — including one hosted by the Financial Times in London this week — and the talk is all of prosperity and stability once more.

I listened to Michael Axworthy of Exeter University speaking at an event held by Scottish-based fund manager MacInroy & Wood last week. His positive case for Iran is hugely compelling. Iran has a young and highly literate population, 60 per cent of which is aged under 35 (no pension problems there) with a wealthy, entrepreneurial and still interested diaspora.

Rouhani brings hope that this time it might be different in Iran
The snow capped peaks of the Alborz mountain range stand beyond buildings and rooftops on the city skyline in Tehran, Iran, on Wednesday, Nov. 25, 2015. Iran will encourage foreign partners and investment as sanctions are lifted and the country seeks to boost its economy after July's nuclear agreement with the world powers, President Hassan Rouhani said. Photographer: Simon Dawson/Bloomberg

The coalition should be better placed to enact the economic reforms the country desperately needs

The literacy rate is over 85 per cent, with 68 per cent of university entrants being women and some 234,000 new engineers graduating every year. The young are also very “IT savvy”, says Mr Axworthy. Think of an interesting IT firm in the west and you can be sure it is already replicated in Iran.

A chat with Iran specialist Dominic Bokor-Ingram of Charlemagne Capital cemented the image. He reckons that Iran can grow its GDP at 6-8 per cent for the foreseeable future. It has all the things it needs to do so. Certainly, sanctions have left plenty of spare capacity — Iran currently uses only 42 per cent of its generating capacity. It has the right sort of population. It has very low debt: net government debt to GDP is a mere 4 per cent (this is the kind of figure that George Osborne fantasises about) and its companies and consumers are all but debt free too.

It has a good starting point — Iran’s economy is already bigger than Australia’s and it is also surprisingly diverse. You might think Iranian prosperity is likely to be based on the fact that it has some of the largest oil and gas reserves in the world (fourth-largest oil reserves and the largest gas reserves of all). You’re wrong, says Mr Bokor-Ingram. Despite all this underground sun, the oil and gas industry made up only 10 per cent of GDP in 2014.

There around 30 other sectors listed on the stock exchange: there may be no Rootes left, but the car industry remains Iran’s second-biggest contributor to GDP (look up Iran Khodro — I wouldn’t mind one of their four wheel drives). You might also think that much GDP is devoted to military spending. Again, wrong. It’s 2.7 per cent.

Sounds good doesn’t it? There are risks. Lots of them. There is the risk that the reformers’ progress is shortlived — that religious hardliners take back control. And that the result of that is the thing investors in Iran most fear — “snapback,” or the automatic reimposition of sanctions.
"There are risks. Lots of them. There is the risk that the reformers’ progress is shortlived — that religious hardliners take back control. And that the result of that is the thing investors in Iran most fear — “snapback,” or the automatic reimposition of sanctions"

There are many geopolitical tensions: Iran is fighting a good few proxy wars. Mr Axworthy also points to nasty signs of family breakdown, gender discrimination and drug addiction (Iran takes a hard line on drugs but is also home to 2.4m heroin addicts) and high levels of corruption. Then there is oil. It might be only 10 per cent of GDP but revenues from it make up some 30 per cent of government income. So oil at $20 rather than $60 does matter.

Still, I’m prepared to overlook most of these risks. Why? Price. The Iranian stock market has risen 20 per cent since the end of sanctions but that still puts it on a 2016 price/earnings ratio of 5.5 times with a dividend yield of 13 per cent (Mr Bokor-Ingram’s numbers). The Mobile Telecommunications Company of Iran has 6.5m subscribers and trades on a price/earnings ratio of 3.5 times. Buy it today and you’ll get a 12 per cent dividend. All this discounts the kind of political and economic disasters that look increasingly unlikely (note that Russia, which I am also prepared to hold on the basis of cheapness is on over seven times) — and makes very little allowance for the improvements that look increasingly likely.

At this price, Iran has to be one of the best opportunities in the investment world right now — even if the “E” in the PE equation isn’t 100 per cent accurate. The bad news is that I’m not the only one to have noticed. Charlemagne Capital held a conference that included Iran this week: it was packed and I was getting texts from excitable rich friends in the audience by coffee time.
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And it isn’t easy for ordinary investors to get in: there are technical problems (with foreign exchange and with custodians) and the US sanctions make it hard for US banks to do much. And of course the whole idea is rather new — foreign buying is a mere 1 per cent of the market.

Charlemagne has the only fund I know (with its Iranian partners) — the Turquoise Variable Capital Investment Fund. Unfortunately, to get in you need to invest $125,000, pay high fees, and not mind there being no liquidity if everyone piles in and then tries to get out again (almost inevitable with newish markets like this). But if you can cope with all of that, Iran is definitely worth a look.

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Published: 12 March 2016

The Central Bank of Iran is developing a set of criterion for assessing domestic banks which will be ready in the next fiscal year (starts March 20), said Akbar Komeijani, the bank’s vice-governor said on Monday.
 “We are putting together a series of standards for banking operations, supervision of banks and liquidity management,” Fars News Agency quoted him as saying.
“By publicizing each bank’s capacities and services, we will help depositors make informed choices. They will know to what extent banks meet their commitments in lending practices and the services they offer,” he said.
President Hassan Rouhani has instructed the CBI to issue ratings for all money and credit institutions which would compel them to improve and meet international norms and regulations.
Despite the impressive progress in international banking in the past two decades, Iran’s banking system has been left behind leading to inefficiency and low productivity.
Referring to CBI governor’s recent comments about interbank rate violations by three banks, he said, “This does not earn them the ‘bad bank’ tag because they had poor performance only in the interbank market.”
“These banks had offered to pay 0.5% higher rates than the official rate, mainly because they needed money quickly,” to improve their balance sheets, he said.
CBI achievements in managing the interbank market in recent months have helped banks meet their short-term liquidity needs, the news agency quoted him as saying.
The CBI started to intervene in the interbank market last November, when the rates were around 29%. However, now it has been lowered to 18.5% and will be cut further to get closer to the rate of inflation which currently hovers around 12%.
 European Reluctance
In a separate development, Iran has said that European banks and companies were too wary about renewing business ties following the lifting of economic sanctions and said it had asked the International Monetary Fund (IMF) to help ease their anxiety.
In January, world powers led by the United States and the European Union lifted most sanctions on Iran in return for curbs on its nuclear program.
But some US sanctions remain, and US banks remain banned from doing business with Iran directly or indirectly because Washington still accuses Iran of “supporting terrorism”. This has deterred some European institutions who fear they could be penalized if they reestablish banking and commercial ties to Tehran.
“There is still ‘Iranophobia’ in the banking sector that we’re trying to overcome,” Hamid Tehranfar, a CBI vice governor was quoted as saying by IRNA.
“We have asked the IMF to review our regulations so other countries’ banks feel reassured. The IMF will announce its assessment in 2018,” he added, without explaining why it would take so long.
As part of sanctions relief, most Iran’s banks were reconnected to the SWIFT international payments network last month, allowing them to resume cross-border transactions with foreign banks. But because of foreign institutions’ legal concerns, activity has been very limited.

 Breaking the Ice
The foreign banks’ hesitation in revitalizing ties with Iran is not due to the negative input from their governments, Reza Nasri an international law expert from Geneva’s Graduate Institute of International and Development Studies (HEI), said on Monday.
“Lack of sufficient knowledge about the new rules after the nuclear accord, fear of financial penalties, and the complexity of matching with the new legal and political climate are among the reasons for foreign lenders’ hesitation in reconnecting with Iran,” he told IRNA. Foreign lenders remain too cautious after their bitter past experience in dealing with Iran.
He said many European banks have already initiated the process of relinking with Iran or are planning to do so. “Signing of deals between the big companies and Iran has accelerated the process of Iran’s economy and banking system reopening to the global economy.”
Following the nuclear accord and lifting of sanctions several heavyweights like Siemens, Total, Shell and Airbus signed billion-dollar deals with Iran. Economic delegations from more than 50 countries, namely Italy, Germany, France, Japan, South Korea, Finland, Turkey, Sweden, Poland and Bulgaria have visited Tehran to pave the way for normal trade and industrial collaboration.
According to Nasri, the laws regarding trade with Iran under the sanctions’ regime were “complicated and multilayered” and some banks like France’s BNP and Britain’s Standard Charter were fined billions of dollars for evading them. “Hence foreigners are still cautious and prefer to take risk-free steps.”
“It will take time for foreign banks to be assured of the fact that direct relations with Iran are safe. Western governments can help accelerate the process by clarifying the new rules to their banks and giving them the assurances they need.”
The senior expert said governments and private sectors, both in Iran and foreign countries can help the process of revamping banking and economic ties with Iran in the post-sanctions era.

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Published: 08 March 2016