Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Economy & Markets

Iran Nuke Deal Could Spur Economic Growth

Your article was successfully shared with the contacts you provided.

It was a deal seemingly brokered at the last minute, but one that even a couple of weeks ago, didn’t seem likely at all.

But now that Iran has signed on the dotted line and agreed with the P5+1 group of countries to limit its nuclear program in exchange for an easing in the economic sanctions that have progressively made things extremely tough for the country, a 30-year impasse has been breached, and that perhaps, is the biggest deal of all with respect to Iran’s economic and political future.

As yet, there hasn’t been any concrete action, and sanctions still in place include, among others, restrictions on investment in Iran’s lucrative oil sector and on its banking system.

However, the agreement indicates an easing of sanctions could happen fairly quickly and in a variety of key areas, 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, such as the auto industry, petrochemical exports, gold and imports of medical equipment and medicine, the lack of which have made day-to-day life in Iran extremely difficult.

All of these will help the Iranian economy almost immediately.

Already, the exchange rate is more stable “and the hysteria of hoarding dollars that caused the exchange rate to collapse in 2012 is over,” Habibi said.

Although the deal is temporary giving Iran has six months to meet certain conditions, not least bringing down its already enriched stockpiles of uranium to below the acceptable level of 5% and not enriching any new reserves to above that limit, it is still extremely important for Iran and the Iranian economy, Habibi said.

“If both [Iran and the U.S.] can take the right steps to fulfill the agreement, this can be the beginning of a more permanent solution,” he said.

There is, of course, some resistance to the agreement, both in the U.S. and in Iran, as well as from other quarters, namely Israel and Saudi Arabia, and there are a lot of risk factors that could set things back.

“Nevertheless, the document is significant in terms of what Iran is giving and what it is receiving,” according to Habibi. H abibi believes it’s also important that Iranian leadership acknowledged the difficulty that sanctions placed and continue to place on the economy. As such, adhering to the stipulations of the agreement will only be in Iran’s best interests, he said, since after the six-month period, there is a chance for a further easing in more important sectors that could benefit the economy even further.

Iran is a place that is of great interest to many countries, given the enormous energy reserves it has. The country abounds in both oil and natural gas. In June, gas giant BP declared Iran to be the world leader in natural gas reserves with 33.6 trillion cubic meters.  Being able to tap into those would be an interesting prospect for lots of countries and corporations, since no Western oil and gas companies have been able to get to those reserves in any meaningful way as a result of sanctions that began with the Iran Libya Sanctions Act of 1996 and became more onerous through the years, even though the country has been trying hard to attract foreign investment into areas such as the South Pars region that it shares with Qatar, Habibi said.

In keeping with the deal just signed, Iran will have to scale back on building new centrifuges that are used to enrich uranium, ease up on building enrichment facilities, and also stop any work on its contentious heavy-water reactor under development at Arak, since that facility can be used as a source of radioactive plutonium.

Iran is also required to allow daily inspections of its various nuclear development sites by officials from the International Atomic Energy Agency (IAEA).


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.