Identifier
Created
Classification
Origin
08BAKU900
2008-09-23 07:24:00
CONFIDENTIAL
Embassy Baku
Cable title:  

ACCOUNTING FIRM EXECUTIVE DISCUSSES ACTIVITIES OF

Tags:  ECON EINV PGOV IR AJ 
pdf how-to read a cable
VZCZCXRO9071
RR RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHKB #0900/01 2670724
ZNY CCCCC ZZH
R 230724Z SEP 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 0035
INFO RUCNIRA/IRAN COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000900 

SIPDIS

E.O. 12958: DECL: 09/24/2018
TAGS: ECON EINV PGOV IR AJ
SUBJECT: ACCOUNTING FIRM EXECUTIVE DISCUSSES ACTIVITIES OF
TEHERAN OFFICE, IRANIAN INVESTMENT CLIMATE, AND IRANIAN
BUSINESS ACTIVITIES IN AZERBAIJAN

Classified By: Joel R. Garverick, Reasons 4.1 (b) and (d)

Summary:
---------

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000900

SIPDIS

E.O. 12958: DECL: 09/24/2018
TAGS: ECON EINV PGOV IR AJ
SUBJECT: ACCOUNTING FIRM EXECUTIVE DISCUSSES ACTIVITIES OF
TEHERAN OFFICE, IRANIAN INVESTMENT CLIMATE, AND IRANIAN
BUSINESS ACTIVITIES IN AZERBAIJAN

Classified By: Joel R. Garverick, Reasons 4.1 (b) and (d)

Summary:
--------------


1. (C) Moore Stephens International accounting firm chief
discussed with Baku Iran Watcher the firm's consulting
activities in Iran and his personal impressions of the
Iranian business and investment climate. He stated that
Moore Stephens has been hired to advise several Iranian
companies on modernization and restructuring, but said
results have been almost universally disappointing, as very
few of their professional recommendations have been
implemented. The Iranian foreign and domestic investment
climate is &bad and not getting better,8 in part due to the
inability or unwillingness of the GOI to offer meaningful
commercial incentives. He said that his Iranian business
contacts do not seem to be suffering negative effects from
economic sanctions, and suggested that years of sanctions
have in some ways been beneficial to Iran,s economy by
encouraging self-sufficiency and de facto &infant
industries8 policies. He discussed &growing8 commercial
activity by ethnic Iranians in Azerbaijan, some of whom are
dual nationals and many of which he said have ties to the
Mashad area. This increased activity has included openings
of small banks and other financial institutions, and
significant purchases of real estate. End Summary.

Meeting with Head of Moore Stephens Baku
-------------- -


2. (C) On September 10 Embassy Baku Iran-watcher met with
the head of the Baku Office of Moore Stephens, an
international accounting firm that also operates in Iran. The
executive, a UK national who has lived in the region for
thirteen years, helped set up their Teheran office, and has
exercised general oversight of it for approximately six
years. During the meeting he discussed Moore Stephens'
activities in Iran and his personal impressions of the
Iranian business and investment climate.

Moore Stephens - Iran Operations
--------------


3. (U) Moore Stephens is the world's eleventh or
twelfth-largest international accounting firm. It has two

operations in Teheran - one an audit business, which was
described as a franchise with which the Baku office has
little involvement; and a management and financial consulting
business, with which the Baku office is more directly
involved. Much of the Iranian staff formerly worked for
Arthur Andersen, and were hired by Moore Stephens after
Arthur Andersen went bust. Both operations work with Iranian
and foreign individuals and corporate clients.

Iranian Management/Modernization Inertia
--------------


4. (C) Without providing details, he said that his
consulting firm has been hired to advise several Iranian
companies, including state-owned companies, on management and
financial restructuring, but claimed that the results were
almost uniformly disappointing. Generally "the Iranians
listen politely to our presentations, nod repeatedly, and do
nothing," he claimed. He opined that this outcome is not
because Iranian managers "don't get it," but because, due to
risk aversion, professional incapacity of some
politically-connected company heads, and/or other reasons not
entirely clear to him, "they just don't want to be bothered."


5. (U) He noted that individual Iranians are extremely
clever and capable, and should not be underestimated because
of problems like the above. Citing Teheran's "world class"
metro system, and Iran's self-sufficiency in food and most
industrial and computer products, he argued that "Iranians
can do anything, once they've set their minds on it."

Iranian Investment Climate - Bad and Not Improving
-------------- --------------


6. (C) He flatly asserted that the investment climate in
Iran, both foreign and domestic, is "not good, and not
getting better - they are the own worst enemies." He
asserted that, despite occasional promises to the contrary,
the Iranian government is consistently unable or unwilling to
provide sufficient tax or other economic/commercial
incentives to either domestic or foreign investors. He added
that interference by Iranian government entities and/or
individuals and investor harassment often continues even
after deals are set and underway. Overall, he observed that
the Iranian investment and general business climate has

BAKU 00000900 002 OF 002


deteriorated noticeably since the end of Khatami's
presidency, adding that "our (Iranian) business over the last
five years has been flat," and disappointing to Moore
Stephens management.

Business Impact of Economic Sanctions
--------------


7. (SBU) Source claimed that he has never heard Iranian
businessmen either here or in Teheran cite or complain about
international economic sanctions as a source of problems for
them - indeed, he suggested, some clever businessmen are
finding ways to actually profit from them through various
trade and financial manipulations. He also opined that that
U.S. and international sanctions may have actually helped the
development of Iran's technical and industrial capacity by
promoting self-sufficiency in food, industrial and
technological products, and de facto "infant industries"
policies.

Iranian Business in Azerbaijan ) A "Mashad Mafia"?
-------------- --------------


8. (C) Putting on his Azerbaijan hat, the Moore Stephens
chief claimed that there has been a steady and expanding
increase of Iranian business activity of various kinds in
Azerbaijan. He said these consist mainly of joint ventures
in financial, construction, and other sectors as well as a
significant increase in acquisition of private and commercial
real estate, including, he claimed, large-scale purchases by
individual Iranians of new apartments in Baku. (Note: new
apartment buildings, finished and under construction, dot the
Baku skyline. End Note.)


9. (C) Source also noted significant business activities by
several Iranian dual-national entrepreneurs, including
Iranian-Azerbaijani and Iranian-American citizenship holders.
According to source, one of these, a client of his, has
opened a bank in Azerbaijan "although he knows nothing about
banking, and the bank isn't making any profits." He claimed
that his client told him that owning this bank is "gives me
something to do," and claimed that it has an increasing
resale value since it possesses a hard-to obtain Azerbaijani
banking license. He added that many Iranian business figures
operating here originate from Mashad, and/or also have major
business interests there.

Iranian Private Life/Attitudes
--------------


10. (SBU) Source claimed to have almost never heard any
criticism of the U.S. or praise of the regime from any of his
Iranian business or personal contacts, and asserted an
impression that most of the "sizable" Iranian middle class
has no interest in the regime or its policies except to make
it as irrelevant as possible to their private lives." He
described the current social atmosphere in Iran as notably
relaxed from earlier years, and claimed that alcohol is now
readily if discreetly available in hotels and elsewhere to
those (many) Teheranis who desire it, e.g., offered as "cold
tea" in certain restaurants. He also described attending
large private parties in homes where wives pushed back their
head coverings and alcohol was served. Overall, he claimed
that despite prevalent western images, social land personal
life in Teheran is "much freer than life in Jeddah or Riyadh."

Comment:
--------------


11. (C) The Baku Moore Stephens chief was a bit guarded in
this initial meeting (e.g., not mentioning any clients by
name),but opened up as the discussion went on. He
volunteered to meet again, and offered to help arrange a
meeting with his Iranian managing partner during on of the
latter,s periodic visits to Baku from Teheran. There is
clearly a great deal more that can be learned from these
sources, and Iran Watcher will work on further developing
this and other relationship with Baku-based sources
knowledgeable about comercial and economic activity in Iran.
End Comment.
DERSE