Role of Sanctions and Macroeconomic Determinants on FDI Inflow: A Case Study

In this paper, we investigate the role of sanctions in the relationship between macroeconomic determinants and foreign direct investment inflows. We also investigate the moderating role of sanctions in FDI inflows into Iran. The empirical results reveal that macro determinants such as infrastructure, exchange rate, inflation rate, investment return, and governance have a long-run impact on FDI inflows in Iran. Our findings also show that GDP growth rate and trade openness have no significant effect on FDI. Our results indicate that sanctions do not have a significant moderating role in the relationship between macroeconomic factors and foreign direct investment. Surprisingly, international sanctions have a positive relationship with FDI inflows in Iran. Furthermore, sanction has a positive impact on the inflation rate and exchange rate in Iran. Finally, our findings show that sanctions have had a significant impact on Iran's economic growth in recent years due to increasing the severity level of sanctions.

FDI figures for oil and gas do not give an accurate picture of the scale of MNEs' involvement in this industry, however, as foreign entry in oil and gas production often involves non-equity modes such as management contracts and production-sharing arrangements.
Depending on the levels of economic, social, and political development, there are many literatures on determinants of the FDI inflows (for example, Stack (Cleeve, 2008); governance quality (Abdioglu et al., 2013); and political stability (Cleeve, 2012;Musibah, 2015). Therefore, these factors might help countries with slow or high economic growth. In other word, countries that have FDI determinant factors are more likely to attract foreign direct investment. However, in the absence of FDI determinants, some countries might lose out in the attraction and retention of FDI (Cleeve et al, 2015).
While it is generally assuming that the boycott of bilateral direct trade between the United States and Iran has been the channel for economic losses for both sides, nothing could be further from the truth. For Iran, the real cost of direct trade losses is partly due to the impact of the decline in FDI, capital inflows and joint ventures. The impact of these non-trade effects on Iran is significant and as a result, it will be difficult for Iran to go back to business as usual with the US and its allies when sanctions are lifted (Askari et al., 2002). Accordingly, in this study, we attempt to explain the issues of sanctions and to shed light on the FDI determinants by examining some macroeconomic factors and the business environment in light of Iran's policymaking on its FDIs. However, this study would attempt to investigate the impact of macroeconomic factors and the imposed sanctions on Iran's capability of attracting FDI inflows.

FDI inflows in Iran
Iran is considered an energy superpower. According to Goldman Sachs (2011), "Iran has the potential to become one of the world's largest economies in the 21st century". Iran as OPEC's second-largest oil producer, possess approximately 94 billion barrels (10 percent of world oil reserves); and has 812 trillion cubic feet reserves of natural gas in the world (17 percent of total). Iran also has enormous mineral resources, including iron, coal, copper, sulfur, and zinc as well as gold. Thus, these natural resources generate a number of processing industries. However, in the case of doing business with Iran, political and currency stability considered the most problematic factor. In addition, due to sanctions, adversity to access international financing is also a major concern.
According to recent policy in Iran, the development of non-oil exports is a priority. Iran has a broad domestic industrial base, an educated and motivated workforce, energy resources and geographical location advantages, which provides access to an estimated population of 300 million people in Caspian markets, Persian Gulf states, and countries further east. According to UNCTAD, Iran has ranked sixth in FDI attraction in 2010.  (2015).
The years of government control over the economy and the lack of private investment coupled with market liberalization and recent reforms have led to interesting business and investment opportunities in many sectors. However, there is no challenge in finding areas of the Iranian economy that require investment.
Despite the uncertainty about the nuclear energy policy, the level of technology and infrastructure available to many industries in Iran makes it possible to develop partnerships with foreign companies. In fact, the presence of MNCs in Iran has increased dramatically over the past 20 years, due to open regulatory policy that makes multinational corporations face less difficulty for investing in Iran (Soltani & Wilkinson, 2011).
According to the "Vision 2025" plan of the Iranian government, within two decades (2025-2005), Iran needs $ 3.7 trillion investment, of which $ 1.3 trillion should be in form of foreign investment. Table (2) shown FDI inflows and outflows in the last six years. The opening of the Iranian market for foreign investment can also create a new investment opportunity for the multinational corporations that invest in different sectors of production and services in the next decade of about $ 600 billion to $ 800 billion in Iran.
Foreign investors focus on several sectors of the Iran's economy including; oil and gas industries, vehicle manufacturing, copper extraction, petrochemicals, food and pharmaceuticals. Iran absorbed US$34.6 billion financing for 485 projects from 1992 to 2009, and $24.3 billion of foreign investment from 1993 to 2007.
However, Figure 1 demonstrate the trend of FDI inflows in Iran from 1990 to 2016 according to UNCTAD (2017) reports. Furthermore, their results also show that infrastructural factors, market size, research and development (R&D), education and scientific output encourage FDI inflows. They concluded that FDI in Iran is more market-seeking and resource-seeking than an efficiency seeking. Soltani and Wilkinson's study (2010) examines international assignees' perceptions and experiences in a sample of Iranian-based MNC affiliates in high growth sectors. Their study indicates that the international assignees' perceptions of managing an MNE affiliate in Iran was often formed prior to their departure and their performance is strongly linked to the level of congruence between MNC and subsidiary's managerial orientation. Their finding reveals that performance tends to deteriorate when subsidiaries are requested to conform to MNC policies and practices.  (UNCTAD 2017).

Gross Domestic Product
The GDP growth rate, is a measure for the country's economic performance. The national economy development can be determined by criteria such as the amount of production, consumption, quality and diversity of goods, and other economic indicators (Musibah et al, 2015).
The growth of GDP can be as a determinant of FDI inflows to countries (UNCTAD, 1998). However, Sahoo (2006) asserts that countries with higher and sustained growth rate will receive more FDI flows.
Kahai (2011) argues that foreign investors are considering the size of the current market as well as potential for future growth in the market. In addition, the importance of GDP growth has been confirmed in many studies (Stack, 2017

Infrastructure
Good infrastructure is essential in recipient countries to realize FDI benefits. The existence of developed infrastructure significantly reduces the cost of doing business for foreign investors and, as a result, increases their investment returns (Morriset, 2001). Therefore, good infrastructure is one of the characteristics of economic development. The development economics literature also emphasizes the need for access to basic infrastructures for poverty alleviation (Yamin and Sinkovics, 2009).
Iran has strong and extensive economic infrastructure. For instant, Iran's transportation network includes 12,000 kilometers of railways and 220,000 kilometers of roads. The country has nine commercial facilities in the south, including the Shahid Rajaee port in the north of the Strait of Hormuz, which deals with more than 80 foreign ports through 35 container lines. In addition, three commercial ports of the Caspian Sea in the north. Iran now has 167 Internet servers or 2.12 per million people and 31% of the people use the Internet. Furthermore, Iran has 29 million Landlines number and 65 million mobile phones number.
H2. Infrastructure has a positive impact on FDI inflows.

Exchange Rate
The literature acknowledges that there is a relationship between the exchange rate and the inflow of foreign direct investment. For instant, Clare & Gang (2010), Kiyota & Urata (2008) and Mowatt & Zulu, (1999) have learned that the exchange rate could lead to fluctuations in foreign direct investment by affecting the cost of acquiring foreign currency. This is because the devaluation of the domestic currency against the value of the foreign currency will make the investment less expensive for a foreign investor in the host country. however, depreciation of domestic exchange rate will stimulate foreign direct investment inflows to that country (Musibah et al, 2015). In the other hand, If the value of a country's currency is decreasing, foreign investors are encouraged to buy assets at lower prices in that country (Blonigen & Ma, 2011).
H3. Exchange rate has an impact on FDI inflows.

Inflation Rate
The rate of inflation represents the overall financial performance of host countries. In addition, high inflation indicates the government's failure to manage the country's budget, representing that the central bank failed to make an effective monetary policy (Hailu, 2010;Schneider & Frey, 1985). Inflation is considered as an important element in the flow of foreign direct investment. In general, higher inflation rates will reduce FDI inflows (Bissoon H4. Inflation rate has an impact on FDI inflows.

Political Stability
In the case of political instability in a country, foreign investors reluctant to start any project unless they are confident that there is a favorable environment to encourage investment reveal that political instability has significant impact on FDI inflow. However, it is assumed that the political stability can assist in attracting FDI inflows.
Madani and Nobakht, (2014) and Kim, (2010) assert that property rights and civil rights as proxies of political stability have key role in the attraction of FDI into the country.
H5. Political stability has a positive impact on FDI inflows.

Trade Openness
Traditional neoclassical theory states that the liberalization of trade and investment accelerates technological progress, improves labor efficiency, increase trade, and ultimately boosts economic growth (Cleeve et al, 2015). The positive association between trade openness and FDI has led to many studies in developing countries, for example, Little et al, (1970) studied the association of trade orientation and economic performance in developing countries. The more a country opens up its domestic market to external trade, the more the country can attract FDI. Trade openness is captured by the ratio of the country`s exports plus imports to the GDP (Sahni, 2012; Nuneset al., 2006). Furthermore, researchers have analyzed the role of FDI in the growth of several economies to investigate the relationship between investment and growth. It is assumed that FDI is a significant source for obtaining capital, up-to-date technology, managerial skills, and enhanced marketing know-how.
In the host country, there are two main channels that determine the trade and FDI relationship. First, countries with a high degree of openness tend to attract more FDI inflows. Second, the inflow of foreign direct investment can affect trade flows through technology transfer and export expansion in the manufacturing sector (Chowdhury & Mavrotas, 2006).
In the case of Iran, the total volume of imports increased by 189% from $ 13. H6. Trade openness has a positive impact on FDI inflows.

Investment Return
Foreign direct investment goes to countries with higher returns. But finding a suitable measure for the return on investment for developing countries is difficult due to the lack of a well-functioning capital market (Asiedu, 2002). Considering that profitability is one of the key determinants of investment. Therefore, the rate of return on investment in a host economy affects the investment decision. Further, the marginal product of capital is equal to the return on capital. However, capitalscarce countries have higher returns (Alavinasab, 2013, Asiedu, 2002. Edwards (1990), Jaspersen et al. (2000) and Asiedu, (2002) employed the inverse of per capita income as a measure for return on investment, and their results showed that GDP per capita was inversely related to FDI. In contrast, Schneider and Frey (1985) reveals a positive relationship between GDP and FDI. It can be argued that GDP is providing better prospects for foreign direct investment in the host country.
H7. Investment return has a positive impact on FDI inflows.

Governance
In recent years, discussions have been held on international development and political discourse within the framework of good governance, and for this reason the attraction of foreign investment is an important factor for the good functioning of the country's market. In fact, governments seeking to attract foreign direct investment should create favorable conditions for multinational corporations. On the other hand, the FDI decision-making process for investors and foreign organizations is very valuable in understanding the status of governance indicators in terms of transparency of administrative processes, reducing corruption and the peaceful environment (World Bank, 2006). Morisset (2000) draw the conclusion that increase administrative costs due to corruption and bad governance, will reduce FDI inflows. Moreover, other studies argue that political and institutional factors are necessary to encourage FDI to developing countries (e.g. Stein and Daude, 2001;Stevens, 2000). In addition, Globerman and shapiro in 2002, assert that the governance infrastructure, including the nature of the legal system is an important determinant of FDI inflow in US.
Samimi and Ariani (2010) employed three governance indicators including political stability, corruption control and the rule of law for investigating the impact of a better quality of governance on FDI inflows in MENA region. They found that these indicators have a positive impact on FDI inflows and improve the governance.
In other study, Mengistu and Adhikary (2011) employed six indicators of good governance included political stability, government effectiveness and rule of law, the absence of violence and control of corruption. Their result reveal that these six indicators have impact on FDI inflows in 15 Asian countries and therefore, can increase the attraction of FDI.
H8. Governance has an impact on FDI inflows. *Six major countries in the South Asian Association for Regional Cooperation (SAARC).

Sanctions
Sanctions are an economic weapon for countries to fulfill their foreign policy goals. Over the last century, various countries imposed many international economic sanctions against other nations After the Iranian revolution, and after the hostage-taking of US agents in 1979, the United States stopped its economic and diplomatic ties with Iran, banned the import of Iranian oil and froze approximately $ 11 billion of its assets (Krauss, 2015 ). In 1996, the US government approved the Iranian-Libyan Sanctions Act (ILSA), which prohibited US (and non-US) companies from investing and trading more than $ 20 million annually with Iran. Since 2000, items such as pharmaceuticals and medical equipment have been excluded from these sanctions (DeRosa and Hufbauer, 2012).
Iran's nuclear program has been debated since 2006, over suspicions of its intentions. The UN Security Council has imposed sanctions on selected companies associated with the nuclear program, which would cause the country's economic isolation (Gheissari, 2009). In particular, targeted sanctions on nuclear, missile and many military exports to Iran, and investment in oil, gas and petrochemicals, export of refined petroleum products, financial transactions, banks, shipping and insurance. In 2012, the European Union made its sanctions harder by joining the US oil embargo against Iran (Solomon, 2014). In addition, the last round of sanctions can bring about $ 50 billion in lost oil revenue annually to Iran.
The UN Security Council has gradually established an international sanctions regime against Iran in 2005, which is committed by all member states.
In 2006, in the first resolution, the Security Council unanimously confirmed that measures include the embargo on materials and technology used in the production and enrichment of uranium, as well as in the development of ballistic missiles, and the blocking of financial transactions related to nuclear and ballistic missile programs. Subsequent resolutions in 2007 and 2008 blocked nonhumanitarian financial assistance to Iran. The fourth resolution approved in June 2010, adopted the U.S. approach, linking Iran's oil profits and its financial sector, including its central bank, to proliferation efforts, therefore subjecting them to international sanction.
Over the years, sanctions have serious consequences for the Iranian economy and people. The United States has made many international efforts to convince Western governments of the threat of Iran's uranium enrichment program and the development of nuclear weapons capability. However, Iran has denied this and believes its nuclear program is for civilian purposes, including power generation and medical purposes (Guzman, 2013).
Iran increasingly uses barter trade since it has been denied access to the international dollar payment system.
Monetary factors also cause problems, as sanctions cause a sharp fluctuation in the value of the Iranian Rial. In addition, a weak currency will make imports more expensive, and affect everything that is based on the Rial, including wages, stocks, homes, pensions, and gold. Thus, businesses also can hardly determine the price of goods and the value of their services.
It is therefore important that there is different between (i) the sanctions imposed on imports of nuclear-related products The US's main focus is on reducing Iran's oil revenues. In this way, the pressure on the non-proliferation of nuclear weapons will increase. Prior to 2012, oil exports accounted for half the revenue of the Iranian government and made up one-fifth of the GDP. Extraterritorial sanctions target foreign companies that provide services or participate in investing in energy activities, including oil and gas and petrochemicals, supplying equipment used in oil refining as well as oil export activities, Such as shipbuilding, port operations, and shipping insurance. 4) Financial and Banking sanctions: US sanctions by the Treasury Department have sought to isolate Iran from the international financial system. Under the 2011 Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), foreign financial institutions, or subsidiaries that deal with banned banks prevented from conducting transactions in the United States and with US Dollars. In late 2011, the United States also prevented importers of oil imports to make payment through the Central Bank of Iran. Other aspects of the financial sanctions include limiting Iranians' access to foreign currencies, so that the funds from oil exports can only be used for bilateral trade with the buyer country or for access to humanitarian goods. Askari et al (2002) believe that financial sanctions policies that are less discussed have had more important and long-term effects. Financial sanctions and policies that can be adequately measured include restriction on export financing, limiting the IMF and World Bank financing, reducing commercial financing, restricting Iran's debt-rescheduling efforts, and reducing FDI inflows (especially in the energy sector). However, effects that are not measurable include air travel restrictions, tourism, and risk assessment of Iran, which in turn affects foreign direct investment in non-energy sectors and other joint ventures.
The data released by the Central Bank of Iran in 2012 indicates a decline in the share of Iranian exports of petroleum products. Sanctions have reduced Iran's access to products needed for oil and energy, and forced many oil companies to stop their activities or exit from Iran. It also reduced oil production due to reduced access to the technologies needed to improve their facilities and performance. Many international companies are also reluctant to do business with Iran because of the fear of losing access to larger Western markets. However, we can state that in better political circumstances, such as non-US sanctions, it is likely to have much higher FDI .
H9. Sanctions moderates the relationship between macroeconomic factors and the FDI inflow in Iran. • Banned provision to Iran of technical or financial assistance related to nuclear activities.
• Banned Iranian export of nuclear-related equipment and material.
• Froze assets of individuals and companies involved in nuclear and ballistic missile programs.

Trade
Feb. The United Nations Security Council Resolution (No. 2231) was adopted on July 20, 2015. Therefore, a plan to suspend and eventually abolish United Nations sanctions with provisions to reimpose UN sanctions in case of non-performance by Iran. Under the Joint Comprehensive Plan of Action (JCPA), to suspend and eventually lifting UN sanctions, almost immediately the EU and the United States announced that sanctions already imposed on Iran were lifted. In practice, all sanctions imposed by the EU were removed. Some US sanctions, but not all of them, have been lifted. Between $ 100 billion and $ 150 billion of Iranian financial assets were released. In addition, trade sanctions that limited Iran's oil exports, as well as restrictions on imports of many goods, were also lifted.

EU Council Common
Hence, it is expected that the lifting of the EU sanctions would have the greatest impact on macroeconomic policy in Iran and elsewhere, because oil accounts for 64 percent of Iran's export earnings, and Iran has a relatively high share (8 percent) of total world exports. In addition, the removal or reduction of inspections on imports and exports of Iran that were imposed as part of the regime of sanctions. Therefore, transport costs are expected to decrease in trade with Iran. Furthermore, due to the fact that the US and other partners have abolished restrictions on financial transactions services, Iran's import of financial services are expected to increase (Ianchovichina et al., 2016).
Nevertheless, on May 8, 2018, President Trump announced that the United States would withdraw from the JCPA agreement.

Data and Methodology
The study tries to identify the determinant factors of foreign direct investment in the Iranian economy based on the secondary data sources for the period of 1991-2014. We seek to explain inward investment in the country based on a number of macroeconomic variables such as infrastructure, trade openness, governance, growth rate, political stability, inflation and exchange rates. These variables have already used in literature as factors that may influence FDI inflows. Since international sanctions made some restrictions on Iran's economy and those may affect FDI as well as macroeconomic factors, therefore, we study the moderating effect of sanctions on FDI during above period.
The data are on an annual basis and taken from various sources including UNCTAD statistics, the World Bank Indicator reports, Political Risk Services (PRS), Worldwide Governance Indicators (WGI), the International Telecommunication Union (ITU) database as well as Iran's Central Bank reports.
FDI INFLOW is actually used FDI. GDP GROWTH is the real gross domestic product (GDP) growth rate. The growth rate can be a representation of the wealth of a country. The good INFRASTRUCTURE will increase investment productivity and encourage FDI inflows (Asiedu, 2002). However, infrastructure measured by the number of mainline telephones per 100 of population, is used to proxy for the level of infrastructural development. GOVERNANCE measures the level of governance and institutional quality in a country. The data regarding the variable is taken from the World Bank Website and the Worldwide Governance Indicators. However, we study the impact of the six governance indicators on FDI inflow measured by the KKM Index, a broad governance measure developed by Kaufmann, Kraay and Mastruzzi (2009) which consists of the average of six indicators including voice and accountability, political stability and absence of violence, regulatory quality, government effectiveness, rule of law, and control of corruption.
Trade OPENNESS represents the degree of openness of a country to international trade and foreign investors. It is measured by the ratio of total imports and exports over gross domestic product. Further, it is recognized as a key factor in attracting FDI to the country (e.g. Cleeve et al, 2015;Sahni, 2012;Sahoo, 2006). INFLATION Correspond to the Consumer Price Index (CPI) change in years. It is a proxy for macroeconomic stability. Therefore, it shows the government's overall ability to manage the economy.
The high inflation rate creates uncertainty about the assets and liabilities of investors. Therefore, companies have less incentive to invest in high inflation countries (Abdellah et al., 2012). Thus, inflation has a negative impact on foreign direct investment. POLITICAL Stability is measured by ICRG, which is the measure of democracy published in the International Country Risk Guide (ICRG). Political Risk Services (PRS) publish the data, it reflect the extent to which elections are free and fair, and the degree to which the government is accountable to its electorate. However, the index ranges from one to six which a higher score implies more democracy and accountability (Asiedu and Lien, 2011). EXCHANGE Rate is time-variant real exchange rate. It represents competitiveness in international trade and the extent of market liberalization in the foreign exchange market (Yao and Zhang, 2001). The depreciation of a host country's currency makes host country's assets become interesting investment targets for foreign investors. In order to measure the INVESTMENT Return, we follow Jaspersen et al. (2000) and Asiedu (2002) to use inverse of per capita income as a proxy for return on investment. Thus, investing in countries with higher per capita income should have lower return, and therefore, real GDP per capita is inversely related to FDI inflow.
SANCTIONS have been categorized based on their effect on Iranian economy: 1) Political sanctions: frozen assets of entities determined to be supporting international terrorism, including individuals and institutions, defense contractors; and any person or entity that assists Iran in weapons development. 2) Trade sanctions: an embargo that prohibits most firms from trading with or investing in Iran. 3) Energy sanctions: sanctioning services and investment related to the energy sector, including investment in oil and gas fields, sales of equipment, and participation in activities related to oil and gas export. 4) Financial sanctions: isolating Iran from the international financial systems such as central bank, credits and swift system. However, to measure SANCTIONS variable, we first explored all sanctions against Iran. However, as shown in Table (5), during 1990 to 2014, about 25 sanctions by the United States (US), 6 sanctions by the European Union (EU) and 9 sanctions the United Nations Security Council (UN) have imposed against Iran.
Then, through interview, we have asked twenty economists to categorize sanctions; and determine the significance of each sanction based on its intensity and impact on Iran's economy. As a result, financial boycotts (found to be the most effective and toughest sanctions on Iran, then energy sanctions, and after that trade; and finally, political sanctions have less impact on Iranian economy. Therefore, we calculated the value of each year's sanctions effects by weighting them based on the type and the number of sanctions imposed for each year. For example, for 2006, there are three political sanctions and one trade sanction, therefore, the value of sanction variable for this year is 0.4 (2 * 0.1 + 1 * 0.2). Moreover, since previous sanctions are still in place, the value of previous year added to the value of sanction in year 2006.
The research framework in Figure (2) shows the impact of selected macroeconomic factors on FDI inflows. However, we expect that the sanction have moderation role in the expected relationship of macroeconomic variables with the FDI inflows in Iran. Having established co-integration among the variables, we investigate their impact on the FDI inflows. For this purpose, we propose Ordinary Least Squares (OLS) method to estimate long-term relationships.

Results
Spurious regression can be avoided if characteristics of time series data are analyzed at the start to know the nature of variables. These variables can either be stationary or non-stationary. However, we used Unit Root Test and Augmented Dickey Fuller (ADF) method in this study. As shown in Table 6, the dependent variable of FDI inflows and the variety of macroeconomic variables are stationary.    The number in parenthesis is t-value. international sanction against Iran has a negative significant impact on GDP growth (t=-2.422) and governance (t=-6.903). Furthermore, sanctions has a positive impact on FDI inflows in Iran.

Macroeconomic Factors
The regression results in Table (9) show that the macroeconomic variables explained approximately 90 percent variations in foreign direct investment in Iran. The value of the F-statistic shows that the equation has a good fit, that is, the explanatory variables are good explainer of changes in FDI inflow in Iran.
As expected, infrastructure is very significant with positive sign and statistically significant. results that indicate GDP growth rate has positive but mainly insignificant impact on FDI in Saudi Arabia. Lastly, error correction parameter is significant and correctly signed, implying that the variables are con-integrated, and that a long run relationship exists among the variables.
In addition, the estimation also illustrates that inflation rate in Iran has a significant negative effect on FDI inflows. Some studies (e.g. Another result of estimation is that the investment return of the economy has a positive relation with FDI inflows, and the variable is significant. The positive impact of investment return on FDI reflects the situation in Iran's oil sector that has continued to attract more foreign investment regardless of the political situation in the country. Furthermore, the results have shown a negative effect of governance on FDI inflows; therefore, our OLS regression results are consistent with the empirical literature (e.g. Kuzmina et al. 2014); the worse the governance quality is the less foreign investment we observe in Iran.
A common explanation of this evidence would be that corruption and potential pressure create uncertainty for investors in terms of their future cash flows, acting as an additional tax and increasing the risks of business capture, thereby decreasing the attractiveness of a particular region (Kuzmina et al. 2014).
Moreover, the result in the model (3) shows that when the sanctions moderates the relationship between macroeconomic determinants and FDI, political stability and exchange rate have a negative significant impact on FDI inflow in Iran. Similarly, Krifa-Shneider and Matei (2010) reported a negative association between political risk levels and FDI inflow. The negative association between political risk and FDI inflows has been supported by some studies (e.g. Acheampong 2000) have shown that political risks play a key role in the decision of the firm to invest abroad. Nevertheless, some authors (e.g. Li and Resnick 2003) fail to show a significant impact of political instability on the FDI inflows.

Conclusions and Implications
Following the literature, this paper examines the known macroeconomic factors from the literature in the context of Iran, which has a unique context, quite different from those of other countries, given its unique geographical and historical situation and especially the unique international sanctions faced by the country. A comprehensive research into the established FDI macroeconomic factors in Iran in the light of the unique international sanctions, would therefore throw new light on the subject, particular the impact of international sanctions on incoming FDIs in a country. This is obviously also a very important issue to post-revolutionary as well as post-sanctions Iran.
Our findings demonstrate that most of macroeconomic factors tend to impact on the FDI inflow into Iran. Gross & Trevino (1996) state that countries which have high levels of GDP growth are highly inclined to increase foreign direct investment flows by attracting trust from multinational corporations (MNCs) and encouraging them to invest. However, according to Biglaiser & DeRouen (2011), more economic development attracts investors and they believe that the potential market is for a high return on investment.
Further, there is a positive significant relationship between infrastructure and FDI. This imply that development of infrastructures will increase inflows of FDI to Iran (Alavinasab, 2013).
FDI investors are usually looking for location that have suitable infrastructure such as roads, transportation and telecommunications. Investing in developed host markets, can reduce investor's production costs and then increase their profits. Foreign investors in Iran have more focused on energy sectors including oil and gas, petrochemicals, as well as telecommunications, car manufacturing, and mine industries.
Javidan & Dastmalchian (2003) have, however, indicated that there are two internal movements with totally different thoughts to determine the direction of the future of the country: those who are not opposed to development and consider it as a means to achieve religious goals; and those who feel that the survival of Islam and the progress of Iran require a more modern perspective. However, continued confrontation between the two streams has caused political instability and turmoil, and has slowed the progress of the country.
Our finding indicate that sanctions has a significant impact on governance. This imply that Circumvent of sanctions may lead to the corruption and bad governance, which increase administrative costs and therefore reduce FDI inflows. However, the governance affects the security of property rights, transparency and legal process.
Furthermore, the results indicate a negative effect of sanction on GDP. This may be due to embargos on Iran's oil and gas, and by which reducing oil exports. Along with dependency of real GDP growth in Iran is oil. Therefore, sanctions have had a significant impact on Iran's economic growth in recent years due to increasing the severity level of sanctions.
Additionally, sanction has a positive impact on inflation rate and exchange rate in Iran. When international financial sanctions hampered access to oil revenues, Iran experienced a currency crisis that led to a sharp decline in the Rial. On the other hand, the government faced a problem to increase foreign currencies for its import needs, since demand for foreign currencies exceeded supply, which in turn led to a depreciation of the Rial. Moreover, sanctions are not the major cause of exchange rate crisis in recent years.
Our results indicate that sanctions do not have a significant moderating role in the relationship between macroeconomic factors and foreign direct investment. Surprisingly, international sanctions has a positive relationship with FDI inflows in Iran. This means that, despite the sanctions, some of multinational companies have realized the opportunities in the Iranian market as a developing economy; and have invested in less-under-threatened industries. Moreover, the special conditions of Iran during the years after the Iraq-war, including the abundance of natural resources, geographic location, the young and educated population; and the growing economy, have set the country as one of the objectives of direct foreign investment.
However, over the years, sanctions have serious consequences for the people and the economy of Iran. Nevertheless, the impact of sanctions is often denied in the Iranian press. Iran has taken measures to circumvent sanctions, in particular through using barter trade and with help of front countries or companies. Moreover, in response to the sanctions, the Iranian government has backed a " resistance economy," such as more domestic use of oil due to limited export markets and the use of alternative industries.
After, the agreement between Iran and the P5+1 in 2015, the so-called post-sanction era has begun in Iran.
In addition, sanctions relief will affect Iran's economy in four main ways: (1) the release of Iran's frozen funds abroad by 2015, which is over $ 100 billion; (2) the lifting of the sanctions against Iran's oil exports; (3) allowing foreign companies to invest in oil and gas, automobiles, hotels and other parts of Iran; (4) permitting trade with the rest of the world and access to a global banking system, such as SWIFT. However, with lifting sanctions, prospects are brighter for Iran, with new opportunities arising in oil and gas, and investment in manufacturing industries. Iran's government have established several incentive programs in order to encourage foreign companies to invest to Iran.
In addition, the attitude toward providing incentives for attracting FDI among economists is widely different. Moreover, some economists (e.g., Blomstrom & Kokko, 2003;Bora, 2002;Black & Hoyt, 1989) argued that providing incentives will attract more foreign investment, create jobs, and provide access to new technologies; and will result to other social and economic benefits. Cleeve (2008) argue that incentive costs outweigh their benefits, and he believes that improvements in local infrastructure, political stability, and macroeconomic stability are better tools for stimulating foreign direct investment inflows.
Nevertheless, in order to maximize the benefits of sustainable development through FDI (and other external sources of finance), policymakers must be mindful of minimizing risks. Therefore, through good governance, stakeholder participation, creating relevant local capacities and increasing absorption capacity (entrepreneurship, technology, skills and communication); and creating effective standards and regulatory framework, risks can be minimized (UNCTAD, 2015). Moreover, developing countries need to provide incentive packages to attract foreign investment (Pajunen, 2008). Haidar (2015) asserts that while export sanctions against Iran have not reduced total exports, but it has increased export costs. If the goal is to reduce total exports, export sanctions may not be effective in a global economy. He argued that sanctions might be less effective in a globalized world because exporters can shift their exports from an export destination to the other. Thus, the idea that a country can impose trade sanctions on another does not necessarily prove the effectiveness of such sanctions, unless the country's exporters are not able to find alternatives and new business partners.
Foreign investors are more motivated to invest in the host country when they are certain that there is a proper market for their products. This can be achieved by creating a suitable environment and incentives for production activities. The Iranian government must strive to make more deregulation in its economy in order to attract more foreign direct investment. This is true since the inflow of foreign direct investment has increased since the introduction of the "investment incentive program" in 2005.
Hereafter, Iran's government should strengthen the political institutions and adopt principles that will ensure stability within the polity. The sanctions on Iran and the current crisis in the Middle East region has been a major obstacle to the instability of Iran's economy. Thus, the restoration of peace in the region will, in turn, woo more foreign investment to Iran.
However, our results suggest that the government needs to allow the exchange rate to depreciate, as this will reduce the price of some of the poor indigenous industries, thus attracting more foreign investment in the form of mergers and acquisitions. Furthermore, Iran needs to increase the competitiveness of the investment environment through investing more in infrastructure and