New Iranian President Leaves Investors Cautiously Optimistic

Rowhani, a complete volte face from Iran’s controversial ex-president Mahmoud Ahmadinejad, has certainly indicated a willingness to come to the table and negotiate on all nagging issues in a much more macro and broader level than in the past. To the extent that Western nations, and again, the US in particular, can do the same, then many stand to benefit, Emadi said, not least the people of Iran, for whom the impact of harsh sanctions has made daily life extremely difficult.

“Sanctions have impacted Iranians at every level, from the availability of commodities to the price of basic utilities, and it has contributed to the rising level of unemployment, especially among young people,” he said. Iran is need of investment in a big way and domestically, government spending depends heavily on the oil sector, said Nader Habibi, Henry J. Leir Professor of the Economics of the Middle East, in Brandeis University’s Crown Center, and Senior Lecturer in the Department of Economics there. “The probability of the sanctions being reversed has decreased from a 1% chance of reduction to 15%, which is still low, but there is a feeling that Rowhani is less controversial and that his statements will not provoke the kind of anger toward Iran that Ahmadinejad’s did,” Habibi said. “That is a very positive development and now that Rowhani has the legitimacy of the presidency and he has the backing of mainstream politicians like [Ali Akbar Hashemi] Rafsanjani, he may even be able to exercise his voice in Iran’s nuclear policy.”  

That, of course, is the one wild card that everything depends upon, but to the extent that President Barack Obama can also come to the negotiating table in the same frame of mind as Rowhani, then there really is hope for a new phase in Irano-US relationships. “I take the example of the US and China: After many years of confrontation, they both sat down and said ‘let’s start again,’ and since, we have seen a fresh approach to trade and finance negotiations between the two countries,” Emadi said.

But as much as the future of sanctions will play an important role in Iran’s ability to attract foreign investment and the necessary technology and know-how to develop the oil sector, Rowhani also has much to do on the domestic economic front. For eight years under Ahmadinejad, economic mismanagement resulted in institutional problems that contributed to the worsening situation, and “the high inflation and the falling value of the Iranian currency have as much to do with these as they are a result of the crisis,” Habibi said. “Iran’s economic policy must be revised and people do believe that Rowhani would bring the rationality and reform needed.”