TTE TotalEnergies SE

By Aresu Eqbali and Asa Fitch 

TEHRAN -- Iranian business leaders were relieved Saturday after moderate President Hassan Rouhani, a proponent of foreign investment and engagement with the world, had secured another four years in office.

Mohammad Lahouti, the head of the Iran Export Confederation, an industry body, said domestic and foreign investors had been sitting on their hands waiting to see if Mr. Rouhani would triumph over hard-line cleric Ebrahim Raisi.

A Rouhani loss could have slowed deal-making, especially with foreign investors wary of hard-liners' emphasis on economic self-reliance.

"If Mr. Rouhani had not won, the world would be waiting to see the new economic policies and the new way of interaction with the world, and it could take longer to make such investments," Mr. Lahouti said.

Mr. Lahouti pointed to the postponement in February by France's Total SA of a decision on whether to invest in a $2 billion gas project, which he attributed partly to skittishness over the uncertain election.

"Ever since electoral activities started and different ideas about investment surfaced, many foreign partners postponed to 'wait and see,' " he said.

Total didn't immediately respond to a request for comment.

Mr. Rouhani has long sought to lift Iranian businesses' fortunes by making it easier for them to transact with the world, part of a strategy to spur job-creation for young people and lift economic growth. Iran's economy is set to grow at 3.3% this year, according to International Monetary Fund estimates.

Ascending to the presidency in 2013 on a platform of prosperity through better relations with the world, Mr. Rouhani's team led negotiations toward the landmark 2015 nuclear deal that removed sanctions on Iran in exchange for curbs on its nuclear program.

Much foreign investment has since come into the country. Major joint ventures were signed between French car makers and their Iranian counterparts, hundreds of business delegations flew in to explore opportunities, and the government revived its aging fleet of jetliners, with multibillion-dollar purchases from Boeing Co. and Airbus Group SE.

But the deal hasn't lined the pocketbooks of most Iranians, leading to a decline in Mr. Rouhani's popularity, according to polling in the months leading up to Friday's vote. It gave a boost to Iran's energy exports, but wider economic impact remains limited as many foreign financial institutions are still wary of dealing with the country.

In the wake of his re-election, business leaders cautioned that Mr. Rouhani will face an uphill battle as he works to expand Iran's economy. Unemployment stands at more than 12%, and the country ranks 131st of 176 countries in a Transparency International corruption index.

Ahmad Pourfallah, managing director of Secco Iran, a building-materials manufacturer, said Iran still hadn't reintegrated into the global banking system after the nuclear deal as rapidly as traders and investors had hoped.

Despite the lifting of sanctions, large international banks have avoided doing business with Iran, after regulators in the U.S. fined many of them billions of dollars for continuing to deal with the country when sanctions were in place.

For other business leaders, the chief concern is continuing to make space for the private sector by reducing the government's role in the economy. The Iranian state has significant business holdings covering swaths of the economy.

"We are demanding that the private sector of the country should be the body implementing the economy," said Ferial Mostofi, a mining, agriculture and trading company executive. "The government should only supervise and give the policy, not interfere in the economy."

In his first four years in office, Mr. Rouhani tried to steer Iran's economy away from the monopolistic interests of the Islamic Revolutionary Guard Corps, the military force overseen by Supreme Leader Ayatollah Ali Khamenei.

The IRGC's fortunes rose under Mr. Rouhani's predecessor, hard-line President Mahmoud Ahmadinejad. He allowed it to take stakes in key state enterprises, including the Telecommunication Company of Iran, the country's largest telecom.

Mr. Rouhani, a cleric and lawyer by training, has been less friendly to IRGC interests.

Write to Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

May 20, 2017 16:02 ET (20:02 GMT)

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