Iran Develops a $5 Billion Weapon to Fight Sanctions
Foreign-investment fund targets assets that give it access to cash, services, goods and technologies that it is at risk of losing
A currency exchange shop in the capital Tehran. Iran’s currency has fallen and its economy has buckled under sanctions. PHOTO: ATTA KENARE/AGENCE FRANCE-PRESSE/GETTY IMAGES
PLANCY-L’ABBAYE, France—With much fanfare, a French-Iranian scientist recently announced a $3 million plan to invest in a bankrupt medical factory that had become a symbol of France’s troubled economy and revive it.
The majority owner wasn’t disclosed: Iran’s government.
It was the latest example of how Tehran is quietly leveraging its Iran Foreign Investments Co. to loosen the Trump administration’s tightening economic noose. The fund, with dozens of investments and cash accounts in 22 countries worth $5 billion, prioritizes assets that give it access to services, goods and technologies that it is at risk of losing under U.S. sanctions, the fund’s advisers say. Iran’s government also hope to build good will and counter the nation’s isolation. And, it hopes, to make money.
In this case, the fund bought the French medical factory and its weed-strewn grounds in June to ensure Iran can obtain medicine for tuberculosis, bladder cancer and other afflictions—drugs that could become difficult to obtain because of U.S. sanctions, said people familiar with the project.
Iran's foreign investment fund bought this bankrupt medical-equipment plant in Plancy-l'Abbaye, France, with a $3 million investment plan. PHOTO: BENOIT FAUCON/ WALL STREET JOURNAL
“Their aim is to make Iran independent” from sanctions, said a fund adviser.
Iran’s already weak economy has worsened since President Trump withdrew in May from a U.S.-led international accord that curbed Tehran’s nuclear-weapons program in exchange for sanctions relief, and restored some financial penalties. The U.S. administration is pressing Iran to abandon its military role in the Middle East and scale back its missile program.
Iran’s currency has plummeted to record lows, foreign investors have fled, and inflation has risen to its highest levels since the previous round of U.S. sanctions ended in 2015. Another round of U.S. sanctions to begin Nov. 5 will ban companies from working both with Iran and the U.S. financial system at the same time.
Iran’s foreign-investment arm is one of several ways Iran is trying to work around U.S. sanctions. Iran is also exploring a barter system with oil buyers taking goods as payment and finding Asian companies to replace the business of departing European companies.
The Iran Foreign Investments Co.’s managers didn’t respond to requests for comment. A U.S. Treasury spokesman declined to comment.
Investment Pile
Iran has been quietly growing its now €5 billion fund which might help it get around U.S. sanctions.
Note: €1 = $1.16
Sources: IFIC Holding AG (ThyssenKrupp, South Isfahan Power Plant —valuation as of late 2016); ThyssenKrupp (Metalúrgica Campo Limpo); the companies (Misr Iran Investment Bank; PAIR Investment; Rössing Uranium; Taageer Finance)
In a January interview with the Oil and Gas Year, a trade publication, the fund’s Chief Executive Farhad Zargari said foreign investments will create “a bridge that allows technology and know-how to flow into” Iran, citing pharmaceuticals as an example. He said the fund was targeting financial services to make it easier for Iranian entities to trade globally.
The fund’s hodgepodge of investments generally aren’t conducted in U.S. dollars. They include stakes in an Afghan trading house, a Brazilian auto-parts plant, a German pipeline company and even an Omani lease finance firm shared with Iran’s regional rival, Saudi Arabia. The fund used its stake in a Dubai company to buy power-generation equipment, said a fund adviser.
Some investments have paid off financially too. Assets held by the fund’s Dusseldorf-based branch rose 16% in three years to €704 million ($814 million) through 2016, according to German corporate records.
But in some the U.S. has limited Iran Foreign Investments Co.’s ability to operate and profit.
The fund, for example, recently considered selling a 4.1% stake in German engineering giantThyssenkrupp AG but backtracked over worries the proceeds could be seized on behalf of Americans who have sued Iran for alleged terrorism and been granted damages by U.S. courts, said people familiar with the matter.
In Brazil, the fund has debated plans to help buy civilian aircraft with proceeds from the sale of a 40% stake in a Thyssenkrupp unit in São Paulo that exports to the U.S., said another person familiar with the matter. The idea became impossible last month after the Trump administration reinstated a ban on selling planes to Iran, that person said.
A Thyssenkrupp spokesman said the company’s Brazilian subsidiary hasn’t paid dividends to the Iranian fund for almost a decade because of sanctions. He said didn’t know if the fund had received any separate dividends for its stake in the German parent company.
Rio Tinto PLC said in 2010 it had frozen dividend payments to Iran’s fund for its 15% stake in a Namibian uranium mine the Anglo-Australian giant controls because of fears that Tehran could use the production for its nuclear program.
Facing scrutiny, the fund operates discreetly.
In France, it bought the medicine factory in the winemaking region of Champagne through a Paris company Vaccinopole SAS, in which it owns a 60% stake, French corporate records show. The French-Iranian scientist, Raymond Abolhassan, owns the rest.
Mr. Abolhassan was greeted in Plancy-L’Abbaye as a savior. The factory had become a symbol of hard times for France after its owner shut the plant and moved its work to China eight years ago. The plant closure drew headlines when staff took hostage a manager in protest.
Mr. Abolhassan said Vaccinopole would start refurbishing the plant this month and start selling its products next year all over the world, including to South America, said Claude Chapelle, the mayor of a nearby village who helped organize the purchase. Mr. Abolhassan declined to comment.
French officials say the factory restart will create at least 40 jobs, positions that will be partly funded by French government subsidies worth €440,000.
“They want to lock up investments, so that the relationship cannot be easily undone,” said a French official familiar with the project.
—Robert Wall in London and Summer Said in Dubai contributed to this article.
Write to Benoit Faucon at benoit.faucon@wsj.com
