As Iran and the six world powers are edging towards a nuclear deal, with both sides yesterday taking an extra week to reach a final accord, foreign investors are getting ready.
The eventual easing or lifting of sanctions vis-à-vis Iran’s disputed nuclear programme can open up enticing prospects for global firms. With its population of around 80mn, Iran would be the largest economy to rejoin the global economic system since post-Communist Eastern Europe in the early 1990s.
Iran’s proven oil reserves of 160bn barrels, close to 10% of the world total, rank it fourth after Venezuela (300bn barrels), Saudi Arabia (265bn barrels) and Canada (175bn barrels), according to BP. The country also has the world’s largest proven gas reserves of almost 34tn cu m (18% of the global total), putting it ahead of Russia (17%) and Qatar (13%).
Templeton Emerging Markets Group chairman Mark Mobius said in April that Tehran’s “thriving” stock market offers many opportunities, including consumer stocks. Iran’s economy could grow between 6% and 8% if sanctions are lifted, compared with estimates of between 1% and 3% in 2014, according to London-based money manager Charlemagne Capital.
But for every investor who sees an opportunity, there are others who expect the same old legal imbroglio. Decades of hostile relations and tight scrutiny by the US Congress and Treasury could hold many investors back.
“Businesses have become terrified about doing business with Iran, and it’s not easy to un-terrify them,” says Trita Parsi, president of the National Iranian American Council.
Iran may not see a quick economic rebound from a potential nuclear deal, according Roubini Global Economics. The benefits wouldn’t take hold before the second half of 2016, with growth now constrained by low oil prices, cautious foreign investors and uncertainty about Iranian government policies, says the study.
The report sees 2.6% real GDP growth for 2015-16 if a final deal is reached, about 1 percentage point higher if the current provisions continued.
More so, no sanctions are likely to be lifted without a nod from the US Congress and a final deal would also have to be endorsed by the UN Security Council.
Iranian officials, however, say interest from foreign investors has been great since the country signed in April a framework nuclear deal with the P5+1 group: The US, China, Russia, Britain, France and Germany.
The Gulf Co-operation Council has welcomed the negotiations on an Iran nuclear deal. Qatar’s Minister of Foreign Affairs HE Dr Khalid bin Mohamed al-Attiyah said in April that the GCC countries would not oppose any agreement with Iran that ensured the peaceful use of nuclear energy.
For over 13 years, Iran’s nuclear designs, led by its overt ambition to become a major regional power, has pushed the region’s stability to the brink. But a peaceful solution to the nuclear programme can make the Middle East a better place, not only for the countries in the region, but for the whole world.
