Deal will have ‘ma­jor’ eco­nomic im­pact

Financial Mirror (Cyprus) - - FRONT PAGE -

Iran’s agree­ment over its nu­clear pro­gramme with world pow­ers, paving the way to lift­ing sanc­tions on Tehran, will have a ma­jor pos­i­tive i mpact on the Ira­nian econ­omy, a lead­ing ex­pert told the Fi­nan­cial Mir­ror.

At the same time, prop­erty de­vel­op­ers ac­tive in Cyprus and Greece are rub­bing their hands in de­light that they will, at last, be able to sell hol­i­day homes or other forms of hous­ing, mainly to younger Ira­nian cou­ples in want for the EU res­i­dency per­mits that are at­tached to in­vest­ments of 300,000 eu­ros in Cyprus.

Big­ger in­vest­ments or wealth-re­lated de­posits will also get them one step closer to ap­ply­ing for cit­i­zen­ship, some­thing that had up­set US diplo­matic cir­cles on the is­land.

On the other hand, Cypriot con­struc­tion com­pa­nies ac­tive in the Gulf, have re­cently been to-ing and fro-ing to Tehran with the hope of clinch­ing some deals of their own, while Trade and Energy Min­is­ter Yior­gos Lakkotrypis paid an of­fi­cial visit to Iran to ex­plore closer com­mer­cial and other ties.

“GDP and growth are very slug­gish af­ter a 15-20 year pe­riod of growth in the post-IranIraq war. Suc­ces­sive five-year eco­nomic plans, while not a rag­ing suc­cess, had nonethe­less pos­i­tive re­sults over­all in lead­ing Iran out from a one-prod­uct econ­omy of only oil and gas,” said the an­a­lyst with over 40 years Iran ex­pe­ri­ence.

“Ac­tu­ally, Iran is a two-prod­uct econ­omy if you in­clude dom­i­na­tion of the pis­ta­chio mar­ket, and has tried to be­come a more mixed econ­omy with down­stream in­dus­tries, man­u­fac­tur­ing and ex­ports,” added the an­a­lyst, who re­mains anony­mous due to his ties with both Iran and the West.

“The UN sanc­tions from 2006 on­wards damp­ened all that down, to the present sit­u­a­tion where wide­spread un­em­ploy­ment (es­pe­cially the un­der 30s) has pre­vailed for sev­eral years and liv­ing stan­dards have fallen. The in­ter­na­tional sales of Ira­nian oil have been badly af­fected by the sanc­tions and is cur­rently los­ing the gov­ern­ment some $4080 bln a month in lost rev­enue. The costly bur­den of state sub­si­dies for the poorer half of the pop­u­la­tion, brought about by a mix of post-war wid­ows/ or­phans/ dis­abled, a low wage econ­omy, sanc­tions and pop­ulist gov­ern­ment poli­cies over decades, may at long last be able to be re­duced if sanc­tions are lifted.”

Ex­am­ples of ma­jor in­dus­tries that will ben­e­fit from re­mov­ing sanc­tions are steel, chem­i­cals, plas­tics, cars, white goods, con­struc­tion and tourism. Iran Kho­dro is now a ma­jor car man­u­fac­turer that re­cently opened ul­tra-mod­ern ro­botic assem­bly lines in con­junc­tion with Rover (the Shang­hai Rover, that is).

Tehran’s cur­rent na­tional eco­nomic plan in­cludes pro­vi­sions to build hun­dreds of new cities, towns and large vil­lages (the small­est build pro­ject be­ing 5,000 dwelling units) and there are huge con­struc­tion projects that will ben­e­fit from as­sured cap­i­tal in­vest­ment flow­ing from the lift­ing of sanc­tions.

Do­mes­tic de­mand is bound to rise es­pe­cially with a rapidly grow­ing Ira­nian pop­u­la­tion, cur­rently at 75 mln. Cur­rently, it is pos­si­ble to get im­ported goods fairly easily in Iran but they are very ex­pen­sive. The com­bi­na­tion of in­creas­ing de­mand and re­duced im­port costs (as the sanc­tions go) may boost the de­mand for im­ported goods of all kinds.

“Put at its sim­plest, the re­moval of sanc­tions will (a) boost ex­port rev­enues from oil but not just oil, and (b) greatly re­duce cost bur­dens aris­ing from cost premi­ums on im­ports and sanc­tions bust­ing,” said the an­a­lyst.

“For­eign in­vest­ment in Iran, al­ready en­cour­aged by the lift­ing of re­stric­tions some five years ago, is likely to rise sig­nif­i­cantly once sanc­tions go. Al­ready, a num­ber of large for­eign com­pa­nies, pri­mar­ily Euro­pean and Asian, have in­vested there in a va­ri­ety of ways. For­eign­ers are now al­lowed to own com­pa­nies there, own real es­tate and have bank ac­counts. Lift­ing the sanc­tions will re-es­tab­lish the SWIFT ac­cess to and from Iran and the bi-di­rec­tional flow of monies. This should have a pos­i­tive ef­fect gen­er­ally, but also to Iran’s tra­di­tional trad­ing neigh­bours in Dubai, Bahrain and other Gulf states, as well as to the near East, Cyprus, Tur­key, etc. For­eign tourism and prop­erty in­vest­ment by Ira­ni­ans is likely to grow once sanc­tions are lifted.”

To the US and the West in gen­eral, the nu­clear pro­gramme deal is pos­i­tive.

“For good or ill, Iran is po­lit­i­cally, eco­nom­i­cally and mil­i­tar­ily sta­ble and holds a piv­otal ge­o­graphic po­si­tion be­tween un­sta­ble and dan­ger­ous states to its east and west. As (For­eign Min­is­ter) Mo­ham­mad Javad Zarif has said, the ISIS/daesh threat is a threat in com­mon to us all. Based on the build­ing of trust and con­fi­dence, the deal then en­ables some form of strate­gic al­liance be­tween the West and Iran to com­bat and de­feat ISIS/daesh.”

“While I be­lieve that a sta­ble Iran ‘on board’ will be a good thing, there are oth­ers who refuse to coun­te­nance such an out­come. Such ob­jec­tion is largely based on fears of var­i­ous kinds. Is­rael re­fuses to be­lieve that Iran is not the devil in­car­nate or that Iran will live up to its deal com­mit­ments. For their part, coun­tries such as Saudi Ara­bia will not ac­cept the trust­wor­thi­ness of Iran on its nu­clear com­mit­ments,” added the an­a­lyst.

“Thus, there may be a rather sur­pris­ing re­align­ment of in­ter­ests with the West get­ting closer to Iran af­ter decades of iso­la­tion, while Is­rael and some Arab states share a com­mon in­ter­est in keep­ing Iran as weak as pos­si­ble. Is­rael has al­ready to­day de­clared that it will en­gage in po­lit­i­cal lob­by­ing to thwart the deal – this pre­sum­ably means us­ing the strong Jewish lobby and APAC in the US to block US sup­port for the deal in Congress. A very neg­a­tive and dan­ger­ous game, in my opin­ion.”

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