Despite Lifting of Sanctions, World Bank Still Reluctant to Engage with Iran

After years of sanctions, things are looking up economically for the Iranian people. However, the World Bank, an organization dedicated to eradicating poverty around the world, appears reluctant to take part in the Middle Eastern nation’s recovery, despite its weighty economic needs.

After years of sanctions, things are looking up economically for the Iranian people. However, the World Bank, an organization dedicated to eradicating poverty around the world, appears reluctant to take part in the Middle Eastern nation’s recovery, despite its weighty economic needs.

While Iran has not reached out to the World Bank directly for assistance, the World Bank has, in turn, not made any offers for assistance, either. Based in Washington, the Bank seems reluctant to engage with the controversial Islamic republic, avoiding the potential political quagmire it could entail.

In 2005, the international community voted to sanction Iran over an ongoing nuclear program. At that point, the World Bank ceased to engage with Iran. However, last year, Iran and the United States (along with a number of other nations) reached an agreement by which Iran would discontinue its nuclear programs in exchange for easing those same sanctions. Yet, the World Bank has not reentered into dealings with Iran.

World Bank President, Jim Young Kim, said of the cold shoulder it has offered Iran: “We’re following the situation very closely … we don’t have any specific plans yet.” The World Bank’s reticence stems from a desire to remain on good terms with its host nation: the United States.

The US is the World Bank’s largest shareholder, and has had mixed and turbulent dealings with Iran. The Bank appears reluctant to aid Iran for fear that the recent winds of political favor that Iran has enjoyed from the world community could easily shift directions with little or no warning.

Recently, the US Supreme Court ruled that frozen Iranian assets held in the United States could be used to satisfy judgments obtained by the families of victims of Iran-sponsored attacks against Americans. In response, Iran has threatened to sue in the International Court of Justice at the Hague. It is unclear what the long-term political fallout of this latest kerfuffle may be.

While the World Bank would not presently be restrained from lending to Iran, a sudden shift in political favor could leave the World Bank without repayment or recourse. “In a situation where you’re going to finance projects that will be open to international competitive bidding, the fact that there are still US sanctions is clearly a complication,” according to Paul Cadario, a former World Bank official.

As noted by a spokesperson for the US Treasury, “Current legislative mandates direct the United States executive director to vote against World Bank loans to Iran.”

In response to the snub, Iran has sought some aid from alternative lenders. It has become one of the founding members of the so-called Chinese alternative to the World Bank, the Asian Infrastructure Investment Bank (AIIB). It is also seeking to join the New Development Bank backed by Brazil, Russia, India, China, and South Africa (BRICS).