For economic revival, Iran needs more than just diplomacy

Iran needs foreign investment and the engagement of the private sector to improve its embattled economic infrastructure.

Camelia Entekhabi-Fard
Camelia Entekhabi-Fard
Published: Updated:
Read Mode
100% Font Size
5 min read

On January 16, Iran returned to the international community after 12 years of isolation with the implementation of the nuclear accord and lifting of oil and financial sanctions. The sanctions were lifted after the International Atomic Energy Agency (IAEA) released a report verifying Iran’s commitment to the deal by dismantling large section of its nuclear program.

This marked the arrival of a historic day that so many Iranians have been waiting for. The question that now arises is what changes are likely following the implementation of this accord?

Iran needs foreign investment and the engagement of the private sector to improve its embattled economic infrastructure. Stability and security are the most important challenges that determine a nation’s economic performance and play a crucial role in encouraging foreign investment. On the face of it, Iran’s diplomacy has succeeded as President Rowhani put it in his encounter with the media on January 17. However, economic revival needs more than just diplomacy.

American companies continue to be the world’s biggest investors, especially in oil and gas sectors. The presence of U.S. firms anywhere in the world encourages other companies to enter into the market. Iran has already suffered huge losses as a result of the U.S. ban on companies doing business with in the country.

For Iran, a fruitful outcome of this deal will be the release of its funds frozen in foreign banks. These funds, estimated to be around $100 billion, are certain to come in handy considering Iran’s need for capital. However, according to the country’s central bank governor, the exact amount Iran can have access to is $32.6 billion.

The government can use this money to pay off delayed salaries of government employees or cut down its deficit. In the long term though, Iran can invest this money in non-oil sectors to improve its economy. This process is likely to take time.

Oil prices, already hovering at the lowest levels in a decade, could plunge even lower with Iran beginning to export the commodity. The country’s oil minister said recently that Tehran will raise oil exports by 500,000 a day within a week after the removal of international sanctions. He also said that the country has no intention to harm the oil market with its planned increase as the market is suffering from overproduction.

Iran needs foreign investment and the engagement of the private sector to improve its embattled economic infrastructure.

Camelia Entekhabi-Fard

Owing to the oil embargo continuing for years Iran has lost its customers to other suppliers. Luring them back would entail giving greater discounts. It is estimated that Iran will export oil at around $20-$22 per barrel.

The Iranian public expect that the nuclear deal will have positive effect on their lives. This may soon turn into disappointment as the changes wouldn’t come soon. Iran’s regional behavior is going to be another factor and may become a deterrent for the investors.

Some European companies may see great business opportunity in Iran. But concerns over internal tussle within the government may compel them to think about it carefully.

Challenges going forward

Some difficulties and challenges cannot be ignored when it comes to full implementation of the Iranian deal. Iran’s ballistic missile program, and the support it has given to groups such as Hezbollah and Hamas, have labelled the nation as sponsor of terrorism, whether they like it or not.

Just a day after the nuclear deal was implemented the U.S. Treasury imposed new sanctions on Iran’s ballistic missile program. “We have consistently made clear that the US will vigorously press sanctions against Iranian activities outside of the JCPOA.” said Adam Szubin, acting under secretary for terrorism and financial intelligence.

This action targets 11 individuals and entities responsible for supporting Iran’s ballistic missile program. The next stage for Iran is to demonstrate its commitment to diplomacy and becoming a reliable nation. This will be put to test during the Syria talks to be held in Geneva in the near future.

With the influence Iran has on government of Assad in Syria and Hezbollah in Lebanon, the world will be watching how this regime acts in the post-sanctions era. President Obama, who appeals directly to Iranians, has urged them to build new ties with the world. We have to wait and see how Iran goes about doing this.

Camelia Entekhabi-Fard is a journalist, news commentator and writer who grew up during the Iranian Revolution and wrote for leading reformist newspapers. She is also the author of Camelia: Save Yourself by Telling the Truth - A Memoir of Iran. She lives in New York City and Dubai. She can be found on Twitter: @CameliaFard

Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
Top Content Trending