Iran’s return: Economic renaissance after sanctions lifted

According to recent reports, talks between Britain, China, France, Russia and the United States - the five permanent members of the Security Council - plus Germany (P5+1) and the Islamic Republic have been ongoing, over the lifting of economic sanctions on Iran’s financial and energy-related sectors.

It is crucial to understand that the sanctions imposed on Iran are among the most complicated that have been imposed on a defiant and rogue state. The sanctions have been developed over 30 years, politically and economically isolating the Islamic Republic from the international community.

The sanctions are not solely due to Tehran’s nuclear defiance, the IAEA’s findings, Iran’s refusal to suspend uranium enrichment, or Tehran’s previous clandestine and undeclared nuclear activities which breached the Non-proliferation Treaty (NPT), but also due to human rights abuses and violations, and being linked to terrorism.

Ultimately when the 30-year regime of sanctions are lifted, the international community will lose its strong leverage against Iran in curbing its nuclear program



In addition, the sanctions can be divided into three major groups: the first set imposed by the European Union, the sanctions enacted by the United States, and finally four major sanctions adopted by the United Nations Security Council.

There are eight U.N. resolutions concerning Iran’s nuclear defiance, four of which include arms embargos, as well as prohibiting the Islamic Republic from buying or selling technologies for nuclear purposes and building atomic bombs. However, Tehran had previously managed to skirt some of these sanctions.

Nevertheless, the rule of sanctions which wreaked havoc on Iran’s economy, brought the ruling clerics to the negotiating table, and endangered the hold on power of the Iranian leaders, were those imposed on Iran’s energy, banking and financial sectors by the European Union and in particular the United States.

In addition, the U.S. prohibited third parties from conducting business with Tehran. Although the talks are linked to Iran’s nuclear program, the lifting of sanctions will most likely include all the aforementioned categories. However, this trend is rapidly changing.

Lifting sanctions when outline is reached

The U.S. and European Union had already lifted some major sanctions on Iran when the interim deal was struck. The easing of sanctions were linked to some of Iran’s sectors such as metal, petrochemical, and gold industries. Several billions of dollars were also released to the Islamic Republic by the United States.

Currently, the issue of sanctions has been a sticking point in the 18-month long nuclear talks. The EU and the U.S. might start the process of lifting sanctions against the Islamic Republic by the end of next week, even before the final nuclear deadline is reached at the end of June.

The final marathon nuclear negotiations consisted of two stages: the first is to reach a general outline by the end of March, and the second phase is to strike a deal with regards to the details, nuances and the technicalities.

The lifting of major sanctions (on oil and energy sectors, Iran’s banking system, and financial institutions) can actually begin as soon as an outline for a final stage is reached by the end of March.

In addition, as the ongoing nuclear talks suggests, there is infinitesimal doubt that the six world powers and Iran would agree on a general outline by the end of March.

Why Rush to Lift Sanctions? Geopolitical Implications

Why rush to lift the thirty-year sanctions against the Islamic Republic? It is worth noting that it is not solely the Islamic Republic that is pushing for the speedy removal of the regime of economic sanctions. The U.S. and EU appear to have a considerable amount of invested interest in lifting the sanctions against Iran as well.

This is mainly due to economic reasons, including Western corporation profits, as well as diversifying oil imports from the Middle East. Iran’s economy bears a crucial untapped market for European countries and the U.S..

In addition, Iran has a population of approximately 80 million people, mainly a young population, and possess one of the largest gas and oil reserves in the world.

On the other hand, when Iranian leaders are unshackled from the economic restrains imposed by the international community and when the lifting of economic sanctions against the Islamic Republic occurs, this phenomenon will bring about significant changes not only in the economic status of the Islamic Republic in the region, but also in the geopolitical chessboard of the Middle East.

Economically speaking, when sanctions on Iran’s energy and financial sectors are lifted, Iran will re-enter the world trade market in full speed, impacting mostly regional business competition.

Iran can easily be a major regional competitor in several industries including automobile manufacturing. For example, Iran is one of the top 15 countries when it comes to manufacturing cars outnumbering the number of cars being produced even in some European countries such as Italy.

When it comes to growth of car industry, Iran ranks 5th in the world, and Iran Khodro ranks 13th taking into account production.

Also European countries will diversify their energy imports by investing in Iran’s oil and gas market. In return, Tehran would be capable of modernizing its industries, mainly gas and oil sectors via buying the required technology from Western countries. This can lead to a major economic revival for Tehran.

Geopolitically speaking, Iran’s oil exports will ratchet up, increasing Iran’s leverage in OPEC and subsequently decreasing the political leverage of other oil producing nations.

Being unshackled from economic sanctions, Iran will undoubtedly be a major economic power directing the political situations in some countries more robustly and confidently.

The Islamic Republic’s support of President Bashar al Assad will increase financially and militarily. Iran is likely to interfere in other countries' affairs including Jordan, Yemen, Bahrain by supporting Shiite groups and oppositional groups that serve Iran’s national, geopolitical, and strategic interests.

Ultimately when the 30-year regime of sanctions are lifted, the international community will lose its strong leverage against Iran in curbing its nuclear program. In other words, Tehran can continue its nuclear ambitions covertly or overtly without being concerned that its political system will be endangered due to economic restrictions.

Undoubtedly, the lifting of sanctions on Iran’s energy and financial sectors will lead to major economic competition in the region, along with impacting the geopolitical and strategic landscapes primarily by shifting the balance of power in favor of Iran and other Shiite coalitions.

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Majid Rafizadeh, an Iranian-American political scientist and scholar at Harvard University, is president of the International American Council. Rafizadeh serves on the board of Harvard International Review at Harvard University. He is also a member of the Gulf project at Columbia University. Rafizadeh served as a senior fellow at Nonviolence International Organization based in Washington DC. He has been a recipient of several scholarships and fellowship including from Oxford University, Annenberg University, University of California Santa Barbara, and Fulbright Teaching program. He served as ambassador for the National Iranian-American Council based in Washington DC, conducted research at Woodrow Wilson International Center for Scholars, and taught at University of California Santa Barbara through Fulbright Teaching Scholarship. He can be reached at rafizadeh@fas.harvard.edu.

Rafizadeh is a regular political analyst and contributor for national and international outlets including CNN, BBC TV and radio, ABC, Fox News, MSNBC, CNBC, RT, CCTV and Aljazeera English. He is frequently quoted in major news outlets including CNN, BBC, Aljazeera and he regularly writes for both academic and non-academic papers such as New York Times International, Foreign Policy, Aljazeera, Los Angeles Times, The Nation, The Atlantic, Newsweek, Yale Journal of International Affairs, Georgetown Journal of International Affairs, George Washington International Review, to name a few.
 

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Last Update: Wednesday, 20 May 2020 KSA 13:55 - GMT 10:55
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
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