U.S. Tech Companies and Investors Look to Gain from Iran Deal

Peeling back sanctions on Iran would breathe life into Tehran’s tech scene—and unlock a young, tech-savvy consumer base for Western tech companies.

An Iranian man shows an IPhone to his customers at his computer shop in northern Tehran on June 1, 2013.
April 13, 2015, 4 p.m.

The pos­sib­il­ity of an Ir­an free of the eco­nom­ic sanc­tions that have weighed on it for years could be a boon to West­ern busi­nesses, which already are con­sid­er­ing ways to take ad­vant­age of po­ten­tially easi­er ac­cess to Ir­an’s eco­nomy and con­sumers.

At the same time, sanc­tions re­lief would be­ne­fit the nas­cent Ir­a­ni­an tech sec­tor, which craves in­ter­na­tion­al in­vestors who have been long kept away from the coun­try.

“There are lit­er­ally thou­sands of early-stage start-ups that are ba­sic­ally a year old,” said Hamidreza Ah­madi, man­aging dir­ect­or of the Ir­an En­tre­pren­eur­ship As­so­ci­ation, a Tehran-based or­gan­iz­a­tion that works to foster the Ir­a­ni­an tech com­munity. These start-ups are faced with enorm­ous chal­lenges when it comes to re­cruit­ing tal­ent and at­tract­ing in­vestors.

Ir­a­ni­ans in the U.S. likely would be the first in­vestors in Ir­a­ni­an tech if sanc­tions were lif­ted, Ah­madi said. The Ir­a­ni­an di­a­spora in the U.S. is made up of about 2 mil­lion people, and its mem­bers in­clude many high-pro­file tech lead­ers and in­vestors. But be­cause of the sanc­tions, they’re keep­ing their dis­tance for now.

Shahab Kavi­ani is one of the Ir­a­ni­an-Amer­ic­ans watch­ing the Ir­a­ni­an tech scene in­tently. He foun­ded Onevest, a web­site that con­nects in­vestors with start-ups, and teaches en­tre­pren­eur­ship at the Uni­versity of Mary­land. He says while the en­vir­on­ment in Ir­an is ripe for tech start-ups—it’s un­der­developed and has a lot of room to grow—he can’t be a part of it yet.

“As an in­vestor, watch­ing that catch-up peri­od could be not only luc­rat­ive, but very re­ward­ing to be a part of,” Kavi­ani said. “But for now, I don’t have a lot I can do there. I sort of watch from afar. I’m sort of wait­ing for the oth­er shoe to fall to be able to get in­volved.”

In Ir­an, Ah­madi says the tech world is start­ing to get ready for the po­ten­tial of for­eign in­vestors. His or­gan­iz­a­tion is put­ting to­geth­er a sort of Yel­low Pages for Ir­a­ni­an tech, where in­vestors can be matched with an Ir­a­ni­an start-up.

But since the Lausanne deal took many by sur­prise, nobody has had much time to pre­pare. “To be com­pletely hon­est, nobody really pre­dicted this,” Ah­madi said. “It’s been 30 years of noth­ing hap­pen­ing.”

Es­tab­lished U.S. tech firms see an op­por­tun­ity for growth in the highly edu­cated, tech-savvy coun­try of 77 mil­lion people.

“I think it’ll be a slow pro­cess get­ting back in­to Ir­an, just be­cause there is a lot of sus­pi­cion across the coun­tries,” said Dar­rell West, dir­ect­or of the Cen­ter for Tech­no­logy In­nov­a­tion at the Brook­ings In­sti­tu­tion. “But I think if sanc­tions are lif­ted, that could be a very valu­able op­por­tun­ity for the tech sec­tor.”

For now, Amer­ic­an tech com­pan­ies that want to put their products in front of Ir­a­ni­ans are held back by re­stric­tions from both gov­ern­ments. On one side, the strict U.S. sanc­tions that pre­vent most com­pan­ies from do­ing busi­ness in Ir­an have kept tech com­pan­ies away from the coun­try, des­pite spe­cial ex­emp­tions for cer­tain kinds of con­sumer tech­no­logy, said Dani­elle Kehl, seni­or policy ana­lyst at New Amer­ica’s Open Tech­no­logy In­sti­tute.

The U.S. Treas­ury ex­emp­tions came after a series of 2009 demon­stra­tions in Ir­an that was co­ordin­ated in part us­ing so­cial net­work­ing plat­forms such as Twit­ter and Face­book. By mak­ing some con­sumer tech­no­logy and on­line ser­vices more avail­able in Ir­an, the U.S. gov­ern­ment tried to keep or­din­ary Ir­a­ni­ans from get­ting cut off from the rest of the world, said Kehl.

But the com­pan­ies have a very hard time tak­ing ad­vant­age of the ex­emp­tions. “Com­pan­ies were al­lowed to en­gage in fin­an­cial trans­ac­tions for au­thor­ized products, [but] that doesn’t re­move the chal­lenge of ac­tu­ally do­ing busi­ness in Ir­an,” Kehl said. Be­cause of the com­plic­ated and re­strict­ive nature of the sanc­tions, U.S. tech largely stayed away des­pite the spe­cial ex­emp­tions.

For its part, Ir­an en­gages in ex­tens­ive cen­sor­ing of the In­ter­net. A 2013 study showed that al­most half of the In­ter­net’s most-ac­cessed web­sites are blocked in Ir­an. The gov­ern­ment has pub­licly ad­mit­ted to throt­tling In­ter­net speeds to “pre­serve calm in the coun­try.”

But top of­fi­cials, in­clud­ing Pres­id­ent Has­san Rouh­ani, For­eign Min­is­ter Mo­hammad Javad Za­rif, and Su­preme Lead­er Ali Khame­nei, are act­ive on Twit­ter and Face­book, even though both are blocked in the coun­try. Young Ir­a­ni­ans use the so­cial net­work­ing ser­vices, too, routinely cir­cum­vent­ing the gov­ern­ment’s In­ter­net con­trols by us­ing vir­tu­al private net­work ser­vices.

If Amer­ic­an sanc­tions are lif­ted and the Ir­a­ni­an gov­ern­ment loosens its grip on the In­ter­net, Amer­ic­an tech firms stand to profit. “There is a huge mar­ket there,” said Kehl. “They’re get­ting a lot of iPhones and oth­er tech­no­lo­gies through il­leg­al chan­nels and through the black mar­ket, and so there’s a ton of op­por­tun­ity.”

Even then, the U.S. would find it­self be­hind in the race to dive in­to the Ir­a­ni­an eco­nomy. Europe—and es­pe­cially Rus­sia—has re­mained a con­sist­ent pres­ence in Ir­an, be­cause the European Uni­on’s sanc­tions are not as strict as the uni­lat­er­al U.S. sanc­tions.

If a deal goes through be­fore Ju­ly, Ir­an’s re­in­teg­ra­tion pro­cess likely would be very slow. The U.S. sanc­tions re­gime is many-layered and com­plex, and would re­quire peel­ing back a com­bin­a­tion of ex­ec­ut­ive ac­tions and le­gis­la­tion. U.S. com­pan­ies may hang back in the months fol­low­ing a deal to al­low the dust to settle and find an­swers to thorny leg­al ques­tions.

Cuba of­fers a hint of what sanc­tions re­lief could look like. It’s been more than three months since Pres­id­ent Obama an­nounced a sud­den thaw in his­tor­ic­ally hos­tile re­la­tions with Cuba, prom­ising great­er tech­no­lo­gic­al in­volve­ment and in­vest­ment in the is­land na­tion. But Cubans haven’t seen many changes yet, partly due to leftover trade-em­bargo re­stric­tions and con­fu­sion over the new set of rules.

Mean­while, Ir­an is lay­ing the ground­work for in­teg­ra­tion by in­vest­ing heav­ily in its own In­ter­net in­fra­struc­ture, The Wash­ing­ton Post re­ports. In the past, Ir­an has worked to strengthen its data link to Europe, in­ves­ted in 3G and 4G cel­lu­lar ser­vice, and bought up large bundles of IP ad­dresses that would make it easi­er for Ir­a­ni­ans to con­nect to the In­ter­net.

“Every­one’s very—how can I say this—con­ser­vat­ively op­tim­ist­ic,” Ah­madi, the Ir­a­ni­an en­tre­pren­eur, said. “It’s not a done deal and a lot of things could go wrong, but I think every­one’s really ex­cited.”

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