Over the past several months, the investment world has turned its ever-roving eye on the Middle East and North Africa.

Since July, four new exchange traded funds have hit the market focusing on these regions. They are the WisdomTree Middle East Dividend Fund (GULF:Nasdaq), the Market Vectors Gulf States Index ETF (MES:NYSE), PowerShares MENA Frontier Countries Portfolio (PMNA:Nasdaq), and the SPDRs S&P Emerging Middle East & Africa ETF (GAF:AMEX).

But the one thing lacking in these ETFs is investments in Iran.

Of course, the U.S. has decreed it will not make investments in Iran, who it considers a state-sponsor of terrorism. That’s nothing to fool around with.

While much of the Western world stands firm by not investing in Iran, other nations, like China and Russia aren’t quite as righteous. Russia has repeatedly stood against strong sanctions in response to Iran’s nuclear program… as has China, but for different reasons. Iran and Russia have a history that goes back to before the Cold War. But China…

Iran is the world’s fourth largest oil exporter, and China, in early December 2007, signed a $2 billion deal with the country to secure oil supplies.

Deals like this have been a welcome balm to Iran’s struggling infrastructure. U.S. and UN sanctions have taken their toll, and foreign investment has been nearly non-existent.

But things may be changing in Old Persia… The country just announced that it will increase its annual steel production to 15 million tons, representing a jump of 50% from current levels.

The steel industry hasn’t had a boost this big since March 2005 when a group of European and Iranian banks funded the Hormuzgan Steel project with $800 million. With imported steel accounting for about 40%-50% of demand, and demand across the Middle East rising significantly with the region-wide building boom, rising prices are creating a real problem for infrastructure expansion.

Iran has eight new major steel projects in the works.

It’s also planning on spending $30 billion to expand the South Pars natural gas field. This investment could reap as much as $22.3 billion a year by doubling annual production to 68 million tons.

Without a doubt, Iran is a major player in Middle East investments, and will continue to be. It has a $13 billion sovereign wealth fund created from its oil wealth. And some of its major investments have been in financial institutions in places like the UAE and Oman.

But will Western investors ever get a chance to make money off Iran’s growth, as it has Dubai, Egypt and Israel? And should they, for that matter?

It’s a philosophical question that I can’t answer. And it gets even harder when you hear that Iran is sharing its nuclear technology with Nigeria… A technology that the country repeatedly insists is for peaceful power generation while refusing to halt its uranium enrichment and submit to the International Atomic Energy Agency’s full inspections. (Though the IAEA does have Iran’s Natanz facility under video surveillance.)

In late August, Iran announced it had 4,000 centrifuges working on uranium enrichment, and another 3,000 being installed.

In a word, the whole situation, for investors and politicians alike, is scary. And while there may be opportunities in playing companies investing in Iran, like Sinopec (SNP:NYSE), the Chinese that inked the $2 billion oil deal, and Fortis Bank (FORB:Brussels), who helped finance the Hormuzgan Steel project, danger still abounds.

That will keep Western investors (most, anyway) on the sidelines, and pure Iranian plays off the investment table.

Tags: Investing in Iran, Iran's nuclear program, Middle East investments

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