Washington: With President Barack Obama securing enough Senate votes to support a historic accord, it looks like Iran is getting closer to escaping the restrictions imposed to discourage it from developing nuclear weapons. Here’s what the deal means economically.
IRAN: The country is clearly the top winner, with its $388 billion economy likely to reach 6 per cent growth as early as 2016, according to Garbis Iradian, chief economist for the Middle East and North Africa at the Institute of International Finance.
OIL PRICES: As home to world’s fourth-largest oil reserves, Iran is likely to increase its production by as much as 800,000 barrels a day in 2016. Still, even as it’s about 1pc of today’s global oil supply, it may not have much of an impact on an already-oversupplied market, according to a report this week from A.T. Kearney Inc. The firm is projecting that Brent oil prices in 2016 will most likely stay in the range of $45 to $65 a barrel.
THE UNITED STATES: Even after the nuclear deal is implemented, sanctions preventing most US companies from dealing with Iran will remain in place. The agreement won’t move the needle on US growth as a whole in 2016, said George Abed, senior counsellor and director for Africa & the Middle East at the IIF. It won’t affect global growth either, he said. One significant exception is the aviation industry. The deal calls for the US to grant licenses to allow the sale of commercial passenger aircraft, as Iran needs to invest at least about $20bn to update its aging planes.
There are also American companies for which the deal might be a threat, such as California pistachio growers. Iran’s pistachio crop was worth more than $1bn last year, comparable to what US farmers grew, and the deal says the US will allow Iranian pistachios imports to the US.
EUROPE: For Europe, removing international sanctions against the Islamic Republic may mean regaining its pre-sanctions status as Iran’s biggest trading partner and restoring what were once $32bn of economic links. Trade between Europe and Iran plunged to about $9bn when sanctions began to be tightened, according to data compiled by Bloomberg News.
As European exports of machinery and industrial equipment to Iran tailed off, China stepped in to fill the void. By 2013, China was Iran’s biggest partner, with trade amounting to more than $41bn.
European delegations began courting Iran well before the nuclear deal was reached, as business leaders seek new sources of cheap oil and a new market to invest in.
If recent history is an indicator, which European country has the most business ties and activity with Iran? Italy ranks as the biggest importer of Iranian goods, while Germany is the top European exporter to Iran, according to Eurostat.
By arrangement with Washington Post-Bloomberg News Service
Published in Dawn, September 6th, 2015