Is It Ethical to Trade With Totalitarian Iran?

04_15_Iran_Trade_01
British Prime Minister David Cameron meets with Iran's President Hassan Rouhani during the United Nations General Assembly in New York on September 24, 2014. Like other Western leaders, Cameron is leading his country's efforts to establish trade links with Iran. Claims that a business investing in Iran is truly benefitting the Iranian people can be measured against the plight of the persecuted Baha'i community, the authors argue. Timothy A. Clary/reuters

In July this year, British Airways will relaunch six weekly direct flights from London to Tehran. And if you sit in first class, you are likely to see well-heeled Western executives jetting off to try to establish joint ventures or sell their high-end technologies in what is one of the only remaining lucrative and relatively unpenetrated markets.

Just this week it was the turn of President Matteo Renzi of Italy to take two hundred Italian business leaders to Iran. In preparation for the trade mission, Italian letting agencies have extended a 5 Billion Euro credit line to the country.

Similarly reliant on government financing to prime the pump, the American aeronautical giant Boeing has just entered into negotiations with Iran, hoping to land its highest profile deal of the decade.

This flurry of activity stems from Iran and the West settling their long-running nuclear dispute when the multilateral negotiations were signed on 2 April 2015. The multilateral sanctions were then lifted on 16 January 2016.

Iran has enormous oil and mineral wealth and is, therefore, set to become a large and rapidly expanding market just at a time when the most of the world’s economies seem to have stalled.

The Situation in Iran

But doing business in Iran raises the ethics question. Businesses like to demonstrate that they are not only profitable but also benefit the community. Many feel compelled to show that they are green, gender equitable, ethnically diverse, philanthropic—and ethical.

So crucial are these questions to perception and brand imaging that business ethics and corporate social responsibility (CSR) are burgeoning disciplines worth billions a year to global companies.

They ask difficult questions: “Does your business harm the environment?” “Do its leaders act with integrity—always?” “Are they honest? Fair? Just?” “Do they care about the people who work for then, buy their products and services—all the stakeholders?”

Now they will have to add to the list, “Do your business links with Iran encourage the regime in its abuse of human rights or are they likely to empower its populace?”

Many accuse Iran of human rights abuses, even “crimes against humanity,” also identifying it as one of the world’s most corrupt societies. They accuse it of genocide, ethnic and cultural cleansing, torture and human rights abuses against journalists, lawyers, women and ethnic and religious minorities.

In the freedom indexes published by Freedom House, Iran scores in the lowest two categories in all areas: civil liberties, political rights, press freedom and Internet freedom and is in the lowest quartile of Transparency International’s Corruption Perceptions Index.

The U.N. General Assembly, Secretary-General, Human Rights Council, International Labour Organization and Special Rapporteurs have repeatedly reported over the last 30 years their deep concern at serious ongoing and recurring human rights violations in the Islamic Republic of Iran” and “over reports of targeted violence and discrimination against minority groups”. Governments and organizations such as Amnesty International and Human Rights Watch express grave concerns, while the World Bank reports Iran among the world’s worst three countries for the legal position of women.

As well as Iran’s human rights record, there are other ethical challenges to doing business in Iran. Scholars have described Iran as a kleptocracy ruled by two unelected groups: the clerical class and the Revolutionary Guards.

The former is led by the Supreme Leader Ayatollah Khamenei, whose position in the Constitution gives him, in effect, absolute power.

Despite appearing to have an austere lifestyle, Khamenei controls a vast commercial empire masquerading as a charitable foundation. It is estimated by Reuters to have $95 billion in capital, greater than the estimated wealth of the last Shah—who was infamous for his extravagant lifestyle.

The Revolutionary Guard owns numerous companies and is awarded government contracts without competitive bids. RAND Corporation reports that it controls or is closely associated with two huge “charitable” organizations that own hundreds of companies that benefit from both tax exemptions and no official oversight.

Mock privatizations have transferred many of the state’s assets to private individuals – relatives of senior members of the regime. Between 60 percent and 80 percent of Iran’s economy is run directly by the state or by individuals and entities in bed with it.

In such circumstances, one must ask, “Is it possible to do business in Iran without engaging with and thereby strengthening these corrupt and corrupting entities?”

The Dangers of Doing Business in Totalitarian States

Doing business in Iran is clearly problematic for ethical investors and businesses. History is unforgiving towards those who collude with regimes that abuse human rights.

Consider businesses that assisted Nazi Germany: They profited from slave labor and supplied the concentration camps—German companies like Siemens, Bayer and Volkswagen; U.S. companies like Kodak, Ford, Standard Oil and IBM and European companies like Nestlé and Cable and Wireless.

Companies that supported South Africa’s apartheid regime—Chase Manhattan, Barclays and Polaroid—suffered losses as a result of the boycott, disinvestment and sanctions campaigns waged by civil society in Europe, North America and elsewhere. To protest apartheid, large numbers of people, companies and organizations in the U.K. and the U,S, closed their accounts with Barclays and Chase Manhattan and disinvested in them. Even today, companies such as Shell and Polaroid suffer unwelcome negative publicity from their South Africa connections of 30 years ago.

More recently, companies accused of paying bribes in China and universities accepting money from unethical regimes have suffered financial losses and seen their reputations plummet.

What Can be Done in Iran?

Companies challenged about doing business in countries where human rights abuses occur often argue that they can bring positive change. This is undoubtedly true, provided they maintain their ethical principles and refuse to collude with discriminatory practices.

The various reports from the United Nations and other organizations mentioned above all agree that the minority that has suffered the most in Iran are the members of the Baha’i Faith. They have endured deliberate, systematic, state-sponsored persecution from the first days of the Revolution to the present.

More than twice the size of the Christian, Jewish and Zoroastrian communities, they are the largest non-Muslim religious minority in Iran. It is worthwhile, therefore, to review their situation and how their economic activity has been systematically suppressed, as an example of the worst human rights abuses perpetrated by Iran’s leaders.

Women, Jews, Christians and Zoroastrians all suffer discrimination and are truly second-class citizens. They are, however, legal persons in Iran, recognized in its Constitution and able to take their cases to court.

The Baha’is, on the other hand, are not recognized in the Constitution and are not legal persons, making their marriages illegal, their children illegitimate, their ability to obtain identity cards difficult and their access to courts blocked.

Everyday life for Baha’is a continual struggle to overcome these obstacles. Their leaders have been executed, all their communal properties and much of their private wealth confiscated , they are excluded from all higher education and are the victims of a systematic government-sponsored media campaign which paints them as an evil “other” in Iranian society.

Since 1991, government institutions have been working under a directive approved by both Ayatollah Khamenei and the then President, Hashemi-Rafsanjani, in which a national plan was initiated to suppress the Baha’i community by blocking its access to economic and educational resources. There is evidence that this is still official policy.

On the economic side, Baha’i-owned businesses struggle to survive, facing as they do the groundless revoking of business licenses and the driving away of customers and service providers. Shops, farms and other businesses are closed—both sporadically across the country and systematically in some towns—and Iranian companies are prevented from employing Baha’is.

The election of the “moderate” President Rouhani was expected to ease the situation for the Baha’is, but it has, in fact, galvanized the hardliners to crack down on civil liberties.

The plight of the Baha'is has recently been raised by leading Islamic religious figures in Iran while Muslim human rights activists and even entertainers have been vocal. Iranian filmmakers have made several documentaries about the Baha’is, all at the cost of their own security and ability to return to or work in Iran.

Given how persecution of the Jews under Nazi rule in the 1930s presaged the unprecedented horrors of Hitler during WWII, repression of the Baha’i community which began in 1979 has served as a bellwether for the human rights situation in Iran ever since.

Today, claims that the Iranian government is improving human rights or that a business investing in Iran is benefitting the Iranian people can be measured against the situation of the Baha'i community.

Acting Ethically

Businesses acting ethically in Iran will give equal treatment to all those they employ or do business with. However, a business owned by a member of a minority group may not have fair access to resources and an individual from that group it may seek to hire may not have had equal access to education.

Acting with integrity today requires more than compliance with regulations, a code of acceptable conduct and advocacy of human rights: It requires a company not be party to or collude with the abusive practices of corrupt regimes.

Shareholders increasingly look at human rights issues. A number of studies have shown that ethically-run companies tend to be more successful and profitable over time. Evidence shows that religious liberty and countering religious discrimination are good for business and economic prosperity.

If the result of engagement with the Iranian market improves the social conditions of groups that are discriminated against, leads to more openness and pressures Iran towards a fairer society, then companies can be said to have exercised ethical leadership and fulfilled their moral obligations.

Otherwise, their engagement with Iran is keeping a corrupt system going and contributing to the unfairness of Iranian society.

Moojan Momen is author of The Beginner's Guide to Shi'i Islam. Jason Pack is a researcher of Middle Eastern History at Cambridge University and founder of EyeonISISinLibya.com.