EghtesadOnline: Iran’s expectation of a big economic boom through “economic recovery” after the lifting of sanctions has not been realized yet.
Many Iranians, although upset by this, still believe this deal is by far the best way for Tehran to end isolation, recapture lost markets, diversify its foreign relations and win “the ideological war” Iran’s enemies in the Persian Gulf have waged against it, reads an article published by Hong Kong/Thailand-based online newspaper Asia Times. Excerpts follow:
Iran’s crude exports soared after the lifting of UN sanctions, exports have doubled and old customers in Asia and Europe are returning. The country’s market share of global crude exports has returned to pre-sanctions levels.
This is, however, related to the recovery of oil market. Lower oil prices have not done much to raise Iran’s capital to a booming level. Neither could oil earnings alone do this.
While a cursory look at the rating figures suggests a fine recovery, figures can be extremely misleading because of their relative nature. Iran has moved up from number 12 among 14 Middle Eastern countries in foreign direct investment and it is just behind Saudi Arabia and the UAE. However, this is only one side of the picture.
Iranian banks and foreign banks that are to play an anchor role in processing this FDI are not allowed to deal in US dollars—the global reserve currency.
European and Asian conglomerates that would otherwise want to invest in the Iranian market do not know how to bypass many US sanctions that continue to extend to organizations and individuals having ties with the Iranian Revolutionary Guards Corps.
On the other hand, while Tehran has made grand pronouncements of billion dollar contracts signed with Boeing and Airbus, it is unclear how such transactions would ultimately get financed. And therein lies the biggest hurdle of the nuclear deal: banking and finance.
While the deal lifted EU and UN sanctions on Iran’s banking and energy sector, most of the unilateral US sanctions related to non-nuclear issues remain.
Moreover, there is the inability of the Iranian government to materialize deals it has made with some regional countries, which is due also to factors that are beyond Iran’s control.
Iran turned to its north to broker one of the most surprising barter deals—the “goods-for-gas” deal between Iran and Turkmenistan, comprising a $30 billion deal over 10 years.
The purpose was to supply energy to Iran’s northeastern provinces that are far from its domestic gas fields. This saves Iran from diverting capital into major new pipeline projects.
However, the project seems to be behind schedule, as only a fraction of the trade has been realized, probably due to Turkmenistan’s failure to absorb $3 billion a year of Iranian products. And the additional problem is that large imports can strangle the development of domestic producers and the jobs needed.