Nuclear agreement implementation gives Iran chance at development

Wednesday, 2017-03-15 10:55:01
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A view of the Bushehr main nuclear reactor south of Tehran, Iran. (Credit: DAPD).
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NDO—A number of opportunities for cooperation have opened up with Iran since the nuclear deal between the Islamic nation and the P5 + 1, namely the US, the UK, France, Russia, China and Germany, came into effect. The breakthrough deal between Tehran and the West has generated expectations of an Iranian economic revival after years of crippling sanctions.

Since international sanctions against Iran were officially lifted in mid-January 2016, many investors and big economic groups have flocked to Iran to take a position in this potential market.

In early March, following the French Foreign Minister’s visit a month earlier, French Finance Minister Michel Sapin arrived in the capital city of Tehran to discuss the new chapter in cooperation between the two countries. The visits by senior French officials took place at a time when many companies from the “Hexagon” wanted to set foot in the Iranian market.

Sapin stressed that, as a member of the European Union (EU), France has made great strides in implementing the historic nuclear deal that Iran has made with the great powers. A range of economic agreements between the two countries in the field of aviation and automobile manufacturing have been implemented.

The Iranian side also affirmed its efforts to expand relations with France, considering Paris an important economic and political partner. Trade between the two countries has increased dramatically, by 200% in just over the last year, to EUR1.7 billion between January and November 2016.

During the recent visit to Tehran by New Zealand Minister of Primary Industries Nathan Guy, the two sides also signed cooperation agreements on agricultural product exports. Minister Guy is New Zealand’s third minister to visit Iran in the last year.

In February, visits by the Swedish Prime Minister and the Foreign Minister of Luxembourg, plus a series of contacts between Iranian and European businesses, showed the "heat" of this Middle East country’s market.

In anticipation of economic activities that are expected to bloom, Iran has ordered the purchase of 100 aircraft from Airbus, Europe's leading aircraft maker, worth US$18 billion, while also ordering 80 new commercial aircrafts from the US Boeing Group worth nearly US$17 billion. Iran has earlier announced that it needs to buy 551 new aircraft to upgrade its passenger fleet over the next nine years. Currently, 100 out of its 166 passenger planes are outdated and unable to take off, making it a potential market for Western aircraft manufacturers.

With crude oil and gas reserves ranking fourth and second in the globe, respectively, it is not too difficult for Iran to revive an economy paralysed by prolonged sanctions. One of the biggest results the nuclear deal has brought about is that it helps Iran to regain its lost market share in the "black gold" market. Iran's crude oil output reached approximately 3.8 million barrels a day, while oil exports rose from 0.9 million barrels a day in late 2015 to nearly two million barrels a day.

Iranian National Petrochemical Company (NPC) Managing Director Marziyeh Shahdaei recently announced that Iran had exported 19 million tonnes of petrochemical products valued at US$10 billion since the beginning of the Iranian calendar year (starting on March 20, 2016). Iran is producing 65 million tonnes of petrochemical products a year and plans to triple the installed capacity of petrochemical complexes in the next ten years.

With many European companies wishing to cooperate with NPC in the field of petrochemicals, Iran plans to invest US$185 billion in oil and gas and petrochemical industries by 2020. The Islamic republic also plans to issue bonds to raise US$4.5 billion for energy projects.

However, there are still many hurdles threatening the recovery of the Iranian economy. The new administration of US President Donald Trump has often threatened to use “punishment” against Teheran. Washington has recently announced new sanctions against Iran after Tehran was listed on its “on notice” list following a ballistic missile test on January 29.

International Monetary Fund experts have warned that the uncertain future of the nuclear deal between Iran and the great powers, as well as a less-than-promising relationship with the new administration in the US, is a barrier to Iran's trade and investment, hindering Tehran's access to the global financial system and negatively impacting its economic recovery.

Although potential risks remain, it can be said that after years of sanctions, the Iranian economy is now converging many favourable factors and is ready to "absorb" huge capital from large corporations from the West.