With sanctions relief for Iran on the near horizon, some reports indicate that U.S.-connected firms are set to take advantage of new openings to develop broader trade ties with Iran.  According to one analyst cited in a Wall Street Journal article last week, “major U.S. companies do not seem worried anymore with covering their tracks in Iran, suggesting a high degree of confidence in the end of the embargo.”

First, the U.S. trade embargo with Iran is not going anywhere fast.  But more importantly, I think the mood captured is wrong and have found evidence of the precise opposite attitude from U.S. companies that I have spoken to – all of whom are either uninterested in or too frightened to show any (public) interest in the (limited) market opportunities soon to be available to them in Iran.  In my view, those alleging renewed U.S. business interest in Iran are confused about the nature of the activities in which U.S. companies are considering to engage with Iran.

Take the WSJ’s report last week: Reportedly, HP’s foreign sub in Switzerland circulated draft agreements with Iranian distributors to resell HP’s consumer products, such as tablets and laptops, in Iran. Evidencing the concern over public exposure of its lawful activities, HP “exchanged only hard copies of the documents with its prospective partners and asked them to sign the documents and return them by post.” Moreover, HP “told its prospective partners in Tehran that no deals would be signed by HP or announced until the nuclear agreement with Iran is completed.”

On the surface, this makes sense. One of HP’s foreign subs is preparing to sell its consumer products to Iranian distributors for resale inside Iran, utilizing the pending license authorization for U.S.-owned or –controlled foreign subsidiaries to engage in trade-related dealings with Iran. Until such license is issued, HP is taking careful steps to avoid incurring any potential sanctions liabilities.

There is one major issue with this story, however: If HP is limited to selling laptops and tablets, as the WSJ alleges, then the sale of those activities is already permissible under General License D-1.  Indeed, HP does not even need to use a foreign sub to engage in the export of such products to Iran, as HP the parent can do so itself under current license authorizations.  The question, then, is why HP is utilizing a foreign sub to sell laptops and tablets to Iran and still waiting until implementation of the nuclear agreement to do so.

My hypothesis is that the reputational risks of doing business with Iran remain so serious for U.S. business that engaging in permissible trade is out-of-bounds for most major U.S. companies.  Just look at how HP was treated a few months ago when a scandal erupted because HP’s foreign subs sold consumer products to Iran back when Republican presidential candidate, Carly Fiorina, was its CEO.  Few pointed out at the time that such trade was perfectly legitimate as it predated the prohibition on the activities of U.S.-owned or –controlled foreign subsidiaries under 31 C.F.R. § 560.215.  Instead, all questioned the legitimacy, not the legality, of HP engaging in such trade with Iran.

Rather than preparing to take advantage of pending opportunities, then, what we might be seeing instead is U.S. companies preparing to take advantage of current opportunities that have been available to them but sorely underutilized over the past couple of years. That’s why HP and Apple are considering entry into Iran (though HP apparently plans on doing so via its Swiss foreign sub and not the U.S. parent). General License D-1 authorized the export of certain personal communication technologies to Iran, including laptops, tablets, and smartphones, but U.S. companies largely failed to take advantage of this trade opening due to banking difficulties and reputational concerns. (From what I understand, only the license authorization for the export of free software to Iran has been utilized to any measurable extent.) Now, with the advent of the nuclear agreement and implementation mere weeks ahead, some U.S. companies are considering a broader entry into Iran’s market via General License D-1.

Contrary to the views of some, though, this delayed effect evidences the considerable concern U.S. companies have engaging in trade-related dealings with Iran so long as Iran remains a reputational pariah.  While U.S. law continues to prohibit most activities involving Iran, U.S. companies will remain put-off by the perceived reputational harm attached to engaging Iran commercially.  Right now, I have seen no evidence that U.S. companies are prepared to should that reputational burden.