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2021 | OriginalPaper | Chapter

The International Financial Institutions: An Ajar Door to the External Financing of Iran

Author : Enrique Martínez-Galán

Published in: The Geopolitics of Iran

Publisher: Springer Singapore

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Abstract

While two of the largest International Financial Institutions (IFIs) in the world, namely, the Islamic Development Bank and the Asian Infrastructure Investment Bank, still finance or are planning to finance infrastructure projects in Iran, other two of the largest IFIs, namely, the World Bank Group and the Asian Development Bank (ADB), have been vetoing any financing or participation of Iran in its governance, respectively, under the manifest influence of the United States (U.S.). Besides, the European Investment Bank, the so-called bank of the European Union, managed to resist strong pressures from France, Germany and the United Kingdom back in 2018 to create a special purpose vehicle that could allow the EU to circumvent U.S. sanctions and continue financing projects in Iran. It is interesting to note that international relations were once very different. In fact, Teheran was one of the three candidate cities to host the headquarters of the ADB back in the 1960s. We will discuss in this chapter the role played by IFIs in Iran, and vice-versa. We will frame the discussion in the theoretical frameworks of financial statecraft (Steil and Litan in Financial statecraft: The role of financial markets in American Foreign Policy. Council of Foreign Relations and the Brookings Institution, New Haven and London, Yale University Press, 2006) and of soft power (Nye in Annals of the American Academy of Political and Social Science 616: 94–109, 2008; Nye in Foreign Affairs 88 (4) (July–August): 160–163, 2009). Furthermore, we will show how, despite the U.S. sanctions, the Iranian economy still manages to obtain financing from IFIs. Finally, we will also debate the relevance of the IFIs in the context of the external financing of the Iranian economy. Looking forward, we will draw scenarios for the future relationship of Iran with the IFIs.

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Footnotes
1
Iran is not a member of the International Center for Settlement of Investment Disputes.
 
2
It was later issued in December 2015, representing MIGA’s first coverage issuance in Iran. However, the guarantee was withdrawn on 7 August 2018. MIGA guarantees provide political risk insurance for foreign investment. MIGA does not provide or infuse cash. It is the insured party—the foreign company—that pays MIGA a premium for the guarantee, and it is to the insured party that MIGA would make payment in the event of a valid claim.
 
3
We choose 2023 by admitting that the approval by the Board of Directors of a given IFI of financing for a project needs that project to be prepared. Grosso modo, a given project takes around two years from the concept note to Board approval, so, if the concept note is prepared in 2021, the project will be expected to be approved by the Board of Directors in 2023.
 
Literature
go back to reference IDB (2019). Annual Report 2018. [online] Islamic Development Bank. Jeddah. IDB (2019). Annual Report 2018. [online] Islamic Development Bank. Jeddah.
go back to reference Keohane, R. (1984). After Hegemony: Cooperation and Discord in the World Political Economy. Chichester: Princeton University Press Keohane, R. (1984). After Hegemony: Cooperation and Discord in the World Political Economy. Chichester: Princeton University Press
go back to reference Nye, J.S. (2004). Soft Power: The Means to Success in World Politics. New York: Public Affairs. Nye, J.S. (2004). Soft Power: The Means to Success in World Politics. New York: Public Affairs.
go back to reference Nye, J.S. (2005). ‘On the Rise and Fall of American Soft Power’, New Perspectives Quarterly, Vol. 22, No. 3, pp. 75–77.CrossRef Nye, J.S. (2005). ‘On the Rise and Fall of American Soft Power’, New Perspectives Quarterly, Vol. 22, No. 3, pp. 75–77.CrossRef
go back to reference Nye, J.S. (2008). ‘Public diplomacy and soft power’, Annals of the American Academy of Political and Social Science, Vol. 616, pp. 94–109.CrossRef Nye, J.S. (2008). ‘Public diplomacy and soft power’, Annals of the American Academy of Political and Social Science, Vol. 616, pp. 94–109.CrossRef
go back to reference Nye, J.S. (2009). ‘Get smart: combining hard and soft power’. Foreign Affairs. Vol. 88, No. 4, July–August, pp. 160–163. Nye, J.S. (2009). ‘Get smart: combining hard and soft power’. Foreign Affairs. Vol. 88, No. 4, July–August, pp. 160–163.
go back to reference Nye, J.S. (2011). The Future of Power. New York: Public Affairs. Nye, J.S. (2011). The Future of Power. New York: Public Affairs.
go back to reference Steil, B. and Litan R.E. (2006). Financial Statecraft: The Role of Financial Markets in American Foreign Policy. Council of Foreign Relations and the Brookings Institution. Yale University Press: New Haven and London. Steil, B. and Litan R.E. (2006). Financial Statecraft: The Role of Financial Markets in American Foreign Policy. Council of Foreign Relations and the Brookings Institution. Yale University Press: New Haven and London.
Metadata
Title
The International Financial Institutions: An Ajar Door to the External Financing of Iran
Author
Enrique Martínez-Galán
Copyright Year
2021
Publisher
Springer Singapore
DOI
https://doi.org/10.1007/978-981-16-3564-9_6