Ambitious new projects to develop the steel and natural gas sectors will dramatically boost production. China and Russia are rushing in to secure supplies. But sanctions prevent the US from investing in Iran.

Sara says ongoing suspicion over Iran’s nuclear program will keep it off the investment table for much of the Western world…

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 (NASDAQ:GULF); the Market Vectors Gulf States Index ETF (NYSE:MES); the PowerShares MENA Frontier Countries Portfolio (NASDAQ:PMNA); and the SPDRs S&P Emerging Middle East & Africa ETF (AMEX:GAF).

But the one thing lacking in these investment vehicles is 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, 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-exsistent.

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 the Middle East, 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 the Middle East.

But will Western investors ever get a chance to make money off Iran’s growth, as it they have in 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.

The whole situation, for investors and politicians alike, is scary. And while there may be opportunities in playing companies investing in Iran, like Sinopec (NYSE:SNP), the Chinese firm that inked the $2 billion oil deal, and Fortis Bank (Brussels:FORB), 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.

Source: Emerging Iran: Danger or Opportunity?

But you need to tread carefully, says Sara Nunnally in Taipan’s Emerging Markets blog. Although there is a bunch of so-called “frontier ETFs” out there to chose from, not all of them make good investments.

If ETFs are your thing, stick to those focused on the Middle East and North Africa, says Sara…

Looks like the world is becoming more focused on frontier markets in Africa and the Middle East. Several new ETFs have popped up, making access to these markets so much easier for US investors.

They are Vectors Gulf States ETF (MES:NYSE), the Market Vectors Africa ETF (AFK:NYSE), the PowerShares MENA Frontier Countries ETF (PMNA:Nasdaq) and Claymore’s Frontier Markets ETF (FRN:NYSE). (Note: The FRN includes investments in a number of other frontier markets, including Latin American and Eastern European countries.)

But just because they give you access to new markets doesn’t necessarily mean they’re great bets…

There are good economic factors out there, and great growth statistics for a number of nations in this region, but keep in mind that these countries are starting from ground zero. We’re talking very little infrastructure and fledgling economies. And a whole lot of social and political unrest in many areas makes for a risky and unstable environment.

In my opinion, I think these ETFs will garner a lot of interest, but investors might do better looking at specific economies or sectors and cherry-picking their opportunities.

That might mean doing a heck of a lot more research, and possibly buying an asset on a foreign exchange, so this type of frontier investing isn’t for everyone. That said, a number of MENA (Middle East/North Africa) and Gulf State countries are listed on major European exchanges, like London, Paris, and on many exchanges in Germany. That should calm some investor fears.

In my opinion, investors should focus more on the following countries for opportunities: Morocco, Kenya, Israel, UAE, Oman, Kuwait and Qatar. Finance, construction, and telecommunications seem to be the top three sectors these ETFs are focused on, aside from energy and commodities, that is.

Egypt is another good option, but there seems to be a bit of concern over food prices and political and religious policy. Nigeria would be an amazing place for investors if it would get its act together, but for now is a no go zone because of all the corruption and terrorist activity.

If anyone is interested in jumping into these ETFs, I think the ones focused on the Middle East and/or North Africa would be a better bet. That’s the PowerShares MENA Frontier Countries ETF (NASDAQ:PMNA) and the Market Vectors Gulf States ETF (NYSE:MES).

Source: Frontier Markets Big on the Radar Screen