WESTERN diplomats are warning that Iran’s economy could come to a standstill as Western banks have halted lending amid escalating fears over the country’s future.

“Concern about the political situation means that the Iranian economy is on hold. There’s no productive investment and once the money from the oilfields runs out, this will tremendously hurt Iran’s future economy,” one diplomat said.

With Iran increasingly alienated from the international community, foreign investors are pulling out as the possibility of sanctions raises fears that Iran will not pay its foreign debt. The climate of uncertainty is also affecting Iranian businesses.

“People in Iran are afraid and a bit disorientated,” said Stefan Goehmann who works for a German bank in Tehran. “Everything is on hold and nothing is really happening. Normal business is going on but bigger investments have slowed down.”

But doing business in Iran has always been sticky, he added. “Iranians are extremely clever and tricky partners. This mostly means that they play with time and they’re excellent negotiators.”

Business meetings in Iran run on what Westerners call Iran Time, which means that extreme tardiness must be taken into account when arriving for meetings or working to deadlines.

“If Iranians say something is extremely urgent, we start to run. But it’s actually not urgent at all and a European doesn’t understand it. Time has no value here,” Mr Goehmann said.

Once a business contract has been negotiated, there is no guarantee that Iranians will adhere to its terms.

In fact, it is common practice for terms to be renegotiated even when contracts have been signed.

“There’s not a concept of accountability in private companies and companies don’t consider themselves bound by a contract,” said Elisabetta Cavanna, a lawyer with the Italian law firm Studio Legale de Capoa, who works with European companies wanting to do business in Iran.

“Iranians know that non-implemented contracts have very little legal strength. They know a European wouldn’t spend six years going to court for a contract that has never even been implemented.”