Pistachios, iPhones and flights: How will Iranians benefit from the nuclear deal?
After years of negotiations and much speculation, the Iranian nuclear deal has finally been penned.
Iranian President Hassan Rouhani said that a “new chapter of hope” had been opened while US President Barack Obama said that the deal offered “an opportunity to move in a new direction”.
If all goes according to plan, Iran will scale back its nuclear programme in exchange for sanctions relief, with the current agreement dictating nuclear development for the next 25 years.
Rosamund de Sybel, a director at the investigative and integrity consulting firm, K2 Intelligence, told MEE that she expects the lifting of sanctions on oil exports and the banking sector to probably double Iran’s economic growth over the next few years.
Economic growth estimates vary vastly from a 2 percent increase to a stellar 8 percent boost in the next few years although de Sybel says that a middle ground scenario - where growth would likely climb from around 3 percent today to 6 percent by 2017 - is most likely.
Shell and BP have been openly sniffing around for deals, and the Iranian leadership has shown itself willing to try and lure in more investors.
According to Arron Reza Merat, an analyst at the Economist Intelligence Unit, new contracts which did not exist prior to the 2010 oil company exodus will be introduced offering a greater increase in return than ever before.
The unfreezing of Iranian accounts could also lead to up to $100bn worth of foreign assets – about a quarter of Iran’s annual GDP - being released back into Iranian coffers. Iranians will no longer have to pay steep commissions to Turkish and Arab middlemen to move money internationally. Ultimately, goods will be cheaper and easier to obtain.
With the prospect of vast economic benefits, IranPoll, a US-based pollster found that 57 percent of Iranians were in favour of the deal.
However, much of this enthusiasm apparently hinges on the people getting real economic benefits and soon.
Timeline to reform
For all the grand headlines, whether or not the current deal will be able to provide this is not immediately clear.
“Some of the reforms will take a long time,” said Siavush Randjbar-Daemi, a lecturer in Iranian History at the University of Manchester.
“Banking relations are basically at rock bottom. No meaningful banking system is in place between Iran and Europe so it is unreasonable to think this will get going in a few months. This will take a lot of time.”
“The same applies to some of the larger [energy] projects.”
De Sybel expects that while oil exports will increase by 25 percent by the end of 2016, it will take three to four years for Iran to produce 4 million barrels a day, seen as an achievable short-term production level.
Ellie Geranmayeh, a policy fellow at the European Council on Foreign Relations, also stressed that the implementation process will be gradual. According to Geranmayeh, the deal will first have to go to the UN, and then overcome domestic hurdles in the US and EU before Iran even starts meeting its own commitments.
Only then will the "EU and US start to implement sanction relief that operate under a snap-back mechanism" which likely will start to happen at the “end of this year”.
“The way the deal is phased, I don’t see a tangible relief in the economy until the first phase is passed.”
Look at the smaller picture
But while larger changes may take some time to manifest, smaller shifts could be felt almost immediately.
Deals might not be finalised, but the recent growth in trade delegations is expected to swell and there could be a spurt in memorandums of understanding.
“That will create momentum and a sense of confidence that is needed to really get the business that Iran needs back inside Iran,” said Geranmayeh.
“Expectations are crucial in business and can have a major impact,” said Randjbar-Daemi.
“While [the larger reform] may come a bit later, people now believe that they will come. People can now plan and look forward to a different scenario.”
This will likely mean that we will see more internal investment emerge even before international banking regulations are relaxed.
Merat believes that small and medium-sized businesses – which make up 95 percent of all enterprises in Iran - will be the first to benefit.
“Iran has a substantial number of SMEs and they are the businesses that have not been able to trade with the outside world. The lack of banks willing to sign letters of credit that stopped them importing and exporting will impact them in a very positive way,” he said.
Apart from oil companies, local producers of Iranian specialities like growers of Iranian pistachio nuts – considered some of the best in the world – will find themselves with unhindered access to markets like the US, explained Randjbar-Daemi.
Other smaller changes may also begin to make themselves felt before the big oil deals and banks roll in.
The situation has become so bad for Iran’s airline industry that in 2010, the EU banned some Iranian aircraft from its skies out of safety fears. However, sanctions relief “will now have a massive impact on airline safety,” said Randjbar-Daemi. “For the first time in 35 years, Iranians will be able to get new airplanes. This might look minor but Iran, being a vast country, needs a very well developed plane network. Until now all our planes – from Iran Air down to cheaper airlines – have mainly been using second hand parts from Europe.”
Apple is also rumoured to be in talks to set up an Iran base for the first time. While Apple devices are already very popular – there are 100,000s already in the country – they have all been bought illegally, Randjbar-Daemi said.
The Iranian Rial could likewise see a knock-on effect from the deal. The currency has taken a tumble since the diplomatic crisis losing two thirds of its value against the dollar since 2011. This has made it hard to get exports and made them even more expensive which has helped fuel rampant inflation.
When Rouhani came to power in 2013, inflation was above 40 percent. It fell to above 20 percent last year and is now hovering around 15 percent, but more remains to be done if the economic damage of previous years is to be reversed. Within hours of the deal, Tehran was already stressing that tackling inflation would be a key priority under the new deal-governed era.
Furthermore, as the economy improves, analysts believe that more investment will be poured into larger-scale government infrastructure projects that will help get young educated people into work, Randjbar-Daemi added.
Politics post deal
Political changes could also be afoot. The nuclear deal has been widely hailed as a big win for Rouhani and his camp.
“In his speech, Rouhani was almost listing all the ways that Iran has come out as the winner in this deal and essentially why people should vote for him because he promised to bring about a breakthrough in the talks, while preserving Iran’s nuclear programme,” said Geranmayeh.
“If we look at the sequencing, what I think the administration in Iran is hoping for, is that they will be able to announce that sanctions are being suspended before the February parliamentary elections. This will be critical in terms of getting people to come out and vote, which will be critical in terms of whether people feel disillusioned and wonder whether their vote counts.”
Iran’s conservatives dominated the body in the 2012 vote and its speaker, Ali Larijani, has been a long-time critic of Rouhani. If the deal helps cement a moderate victory in February and allows Rouhani to win a second term in 2017, analysts predict that expectations for wider socio-economic change will follow, with a subsequent impact on issues like human and women’s rights and free speech.
“There will be a lot of pressure on Rouhani to deliver on political and social issues if he is elected again,” said Geranmayeh. “For the years that he has remaining of his first term, there will be an expectation for the economy to be a priority and there will be less pressure on human rights and civil liberties but I think this will be a really hot topic in his second term.”
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