Iran’s game-changing impact

With the haunting Syrian refugee tragedy dominating the European agenda President Obama’s success in securing enough votes from his own Democratic Party to force through the iran nuclear deal has gone all but unnoticed.

it will dramatically change the strategic balance in the Middle East and be a transforming economic event for the region and all of us.

the lifting of the sanctions that crushed iran’s economy and brought tehran to the negotiating table has been front-end loaded.

So the impact on iran, the Middle East and the oil price should be fairly immediate.

An analysis by the World Bank’s chief economist for the region Shanta Devarajan argues that the main impact will be on iran’s oil exports that declined by one million barrels a day following the imposition of the embargo in 2012.

the World Bank forecasts it will take up to a year for iran’s oil exports to reach pre-sanction levels, but the country could start to sell some of the 30-40m barrels of oil that it has stockpiled in the Middle East.

the impact on iran would boost the growth rate to 5pc after two years of recession. iran’s trade and financing costs will be considerably lowered and the eventual boost to the economy will be in the order of $17bn or 3.5pc of total output.

it expects the motor car and pharmaceutical sectors to recover strongly as a results.

if exports of iranian oil are eventually restored to one million barrels a day, then the impact on will be to dramatically lower the world price by 14pc, or $10-a-barrel, adding to the significant deflationary trends already being seen in the West. iran’s gains will be the loss of other Middle East and north African producers.

the World Bank suggests that among the main beneficiaries of the iranian-induced oil price drop will be the US, Britain and paradoxically (because it has opposed the agreement) israel - one of the world’s biggest pharma producers: an industry that is a big user of crude oil. Given that the oil price has fallen more than 50pc in the last 12 months the impact on stuttering global growth is unlikely to be dramatic.

Latest data from the eurozone and the comments of Mario Draghi, at the European Central Bank, promising more quantitative easing if necessary, suggest that global recovery is stalling.

Greek risk may have been temporarily eliminated but the ripples from market chaos and slowdown in China, the world’s second largest economy, are being felt in the West.

there have been reasonably confident predictions from George Osborne and Bank of England governor Mark Carney that the UK can avoid the Chinese stall that looks to be damaging the eurozone, Asia and emerging markets.

the latest data showing a softening of the UK services sector, coming hard on the heels of manufactur- ing splutter, suggests we cannot be so sure. As Britain’s recovery has unfolded Goldman Sachs has been upbeat about prospects.

the investment bank’s note, based on the drop in the UK services index in August, warns of an ‘easing in momentum seen since the start of the year’. Ouch.

Death wish

THE reputation of the Co-operative Group looked to be irreparably damaged after the cash, drugs and sex scandal at the bank.

it has needed a steady, non-political hand on the tiller in the shape of Richard Pennycook to turn the tanker. After the huge bank-induced losses of the past there was both life and death in the first half of this year.

Retail perked up with a 3pc lift in same store sales, a performance that bigger players such as tesco and J Sainsbury can only dream of.

And the drought in deaths, which slowed the performance of the funeral parlours, has come to an end.

All the emphasis now is on rebuilding reputation and repositioning the retail stores in the community and neighbourhoods.

to that end the focus is on invest- ment rather than rewarding members through the famous dividend.

Some £150m of spending is earmarked for 2015.

As for the bank, Pennycook insists that the group’s 20pc stake is there to stay. it shares one million customers with the shops and the enterprises remain inextricably bound together.

One trusts that the Co- op’s private equity and hedge fund partners in the bank feel the same way.

Midland demotion

THERE has been great excitement at the prospect of HSBC restoring the Midland name to Britain’s Birmingham-based, ring-fenced high street bank.

the uninspiring message from HQ is that the new enterprise will be called HSBC UK, leaving the existing brand in the footlights.

it may, however, presage a second more significant decision.

there has been much huffing and puffing from HSBC bosses about leaving the UK to escape the bank levy.

But after the tax changes in the July budget and the Chinese syndrome, Canary Wharf must look a far safer haven than hong Kong or Shanghai.