Executive Summary
This report assesses the structural feasibility of large-scale United States investment in Iran’s energy and infrastructure sectors and examines the broader geopolitical consequences of such a development.
It concludes that sanctions relief alone would be insufficient to trigger significant capital inflows and that any meaningful reintegration of Tehran into global financial markets would carry profound implications for regional balances of power.
Key Takeaways
- Sanctions relief alone will not unlock US capital; systemic financial reform, macroeconomic stabilisation, and institutional transparency are prerequisites.
- Large-scale investment would shift economic influence within Iran, diluting the leverage of state-owned and quasi-state entities and redistributing authority among entrenched political and economic actors.
- Whether through a conflict disrupting Gulf supplies or through US companies securing Iranian oil and gas contracts, Europe’s energy reliance would increasingly tie it to United States‑centred supply chains.
Information Background
Following two rounds of negotiations, Iran has reportedly proposed allowing US companies to participate as contractors in major oil and gas projects. This is not an unprecedented development. In 2025, President Masoud Pezeshkian publicly stated that Supreme Leader Ayatollah Ali Khamenei “has no objection” to US investment in the country, showing that, at least at the declaratory level, such economic engagement is not formally precluded.
Proponents of this view assume that the lifting of sanctions would automatically allow substantial Western capital inflows, including from major US corporations. However, structural constraints extend far beyond the sanctions regime. Experience after the JCPOA shows otherwise: partial sanctions suspension did not fully reintegrate the Islamic Republic into global finance, as major banks remained wary of legal exposure, compliance uncertainty, and reputational risk.
Macroeconomic Stability and Investment Absorptive Capacity
Tehran’s unresolved status with the FATF remains a major obstacle. High-risk listing imposes enhanced due diligence for international banks, raising compliance costs and regulatory scrutiny. Without full alignment with FATF recommendations, access to trade finance, project structures, and cross-border settlements remains limited.
Domestically, Iranian banks face structural weaknesses—high non-performing loans, low capital adequacy, inconsistent IFRS (International Financial Reporting Standards) adoption—undermining transparency and increasing credit risk for foreign partners.
Macroeconomic instability compounds uncertainty. Chronic high inflation, exchange rate volatility, and fiscal deficits, alongside currency convertibility and profit repatriation restrictions, deter long-term investment. Legal and regulatory unpredictability, including property rights, licensing, and judicial enforcement, further complicates entry. Strategic sectors are often dominated by state-owned or quasi-state entities, with opaque ownership and politically influenced management, increasing counterparty risk.
Energy infrastructure challenges add operational risks: underinvestment, ageing facilities, declining outputs, inefficiencies, and rising maintenance costs constrain industrial expansion. Technology transfer is limited by weak intellectual property protections, discouraging deployment of advanced systems.
These factors suggest that sanctions relief is necessary but insufficient; institutional convergence with global financial, regulatory, and governance standards is the core constraint. Nevertheless, the Islamic Republic shows positive investment signals.
Between 2021–2023, FDI reportedly exceeded $11 billion, mainly in oil, gas, and industry; by end-2024, $5 billion in projects were approved across diverse sectors. This suggests that when the regulatory framework is navigated, investors are willing to commit capital beyond just hydrocarbons.
Iran possesses several structural features that can be attractive to investors in favourable conditions such as natural resources (substantial hydrocarbon reserves and mineral wealth) competitive labour costs, industrial infrastructure (the country has a network of industrial parks, strategic ports, and transport links that can support export-oriented production, facilitated by a strategic geographical position) and a large domestic market (with a population of over 85 million, Iran represents a significant consumer base for investors targeting regional markets).
There are also indications that Tehran’s authorities recognise the importance of meeting international standards that could ease investment flows. For instance, recent legislative progress toward compliance with global financial regulations like the FATF framework has been reported. Achieving such compliance could lower barriers to banking relationships and trade finance for foreign firms.
Geopolitical Analysis
At the structural level, large-scale US investment in Iran would require a degree of financial transparency, legal predictability, and ownership clarity that could alter the internal balance of economic power.
Iran’s economy is deeply intertwined with state-owned entities, quasi-state foundations, and organisations linked to the Islamic Revolutionary Guard Corps. Genuine financial reintegration would necessitate enhanced transparency in ownership structures, full compliance with international reporting standards, and improved capital supervision. Such reforms could dilute the economic leverage of entrenched power centres, making economic opening not merely a financial issue but a redistribution of influence within the political system.
Regionally, a reintegrated Iran would partially rebalance its strategic dependencies. Current economic isolation has strengthened Tehran’s reliance on China and Russia. Re-entry into Western financial and energy markets could diversify Tehran’s partnerships and reduce Beijing’s and Moscow relative leverage. Nevertheless, essential infrastructure, including the North–South Transport Corridor, will continue to hold paramount strategic importance for Tehran’s trade operations.
Neighbouring Gulf states would likely interpret such a shift ambivalently. On one hand, economic integration could incentivise moderation and reduce incentives for regional destabilisation. On the other hand, an economically strengthened Iran would represent a more capable long-term competitor in both energy markets and geopolitical influence.
Israel would closely scrutinise any US–Iran economic engagement, particularly if accompanied by reduced pressure on Iran’s nuclear and ballistic programmes. Still, Tel Aviv cannot tolerate Washington normalising ties with the Islamic Republic, nor the emergence of a wealthier, more powerful Iran that could alter its regional status.
Within the United States, even under an administration inclined towards transactional diplomacy, substantial constraints would remain. Congressional oversight, domestic political pressures by lobbies, and regulatory compliance standards would shape corporate risk calculations.
US firms operate primarily on risk-adjusted returns, not geopolitical signalling. Absent secure profit repatriation, reliable access to international banking channels such as SWIFT, enforceable arbitration mechanisms, and protection of intellectual property rights, large-scale commitments would remain unlikely.
The oil and gas sector constitutes the decisive test case. Iran’s upstream industry faces natural field decline, requires enhanced oil recovery technologies, and suffers from years of underinvestment. Large-scale modernisation would necessitate long-term contractual stability and internationally enforceable dispute resolution mechanisms. Such arrangements could imply partial operational control or production-sharing structures, politically sensitive within Iran’s sovereignty narrative.
A further strategic dimension concerns energy leverage. If a future US administration were to secure substantial influence over Iran’s oil and gas sector, this would significantly alter global supply geometry. At present, Russia remains under sanctions, and Venezuela’s hydrocarbons are subject to varying degrees of US-linked leverage and political conditionality. Should Washington simultaneously exercise influence over Venezuelan flows and gain leverage in Iran, the cumulative effect would increase US indirect influence over a substantial share of global sanctioned or politically constrained hydrocarbon reserves.
Under such conditions, Europe’s energy dependency profile would shift. Reduced Russian supplies have already reoriented European import structures. If US influence extended over Iranian and Venezuelan output, European diversification options could narrow, potentially increasing reliance on US-aligned supply chains, financial channels, and LNG flows.
A parallel scenario involves regional destabilisation in the Gulf. Significant disruption affecting, for instance, Qatari gas exports or Saudi oil flows would similarly constrain European energy diversification. In both cases, European strategic autonomy would be structurally weakened by concentration of supply leverage within a narrower set of actors, and its dependence on the US would increase.
Conversely, a scenario centred on gradual economic engagement with Iran, tied to phased institutional reform and non-coercive financial integration, could expand Europe’s diversification space. By leveraging investment, banking normalisation, and regulatory convergence as incentives for reform, external actors could influence Iran’s structural trajectory without relying exclusively on coercive pressure. Such an approach would treat economic integration as a strategic instrument rather than a by-product of sanctions policy.
Three plausible scenarios emerge. First, sanctions relief without structural reform would generate limited reintegration and largely symbolic investment flows. Second, partial banking reform and FATF alignment could attract cautious European and Asian engagement while US firms remain constrained. Third, deep institutional reform combined with durable political accommodation would enable systemic reintegration, reshaping regional energy balances and global supply dependencies. At present, the first scenario appears the most probable absent major political transformation.
Conclusion
Sanctions relief alone would not unlock large-scale US investment in Iran. Structural financial reform, macroeconomic stabilisation, and institutional transparency are prerequisites for meaningful capital inflows.
The strategic implications of reintegration extend far beyond economics. Control, influence, or destabilisation within the Iranian and Gulf energy space would directly affect European energy security and global supply leverage.
Consequently, any policy approach towards Tehran must be evaluated not solely through a sanctions lens, but in terms of its long-term impact on regional equilibrium, internal Iranian power structures, and transatlantic energy dependence.
