Iran’s President Hassan Rouhani has described as “historic” and a “great victory” the lifting of sanctions against Iran, declaring that the country is now reopening its doors to the international economy. The sanctions were lifted on Sunday after the International Atomic Energy Agency, the UN nuclear watchdog, announced that Iran fulfilled its obligations under the July 2015 accord.
For Iran, long frozen out of the global economy for its contested atomic programme, implementing the nuclear deal is a welcome change. Indeed, as the Western-led sanctions mounted on Teheran, the country was pushed out of the global oil market. Iran’s oil production was reduced from being the second largest in the Organisation of the Petroleum Exporting Countries (OPEC) to the fourth in 2013, “after Saudi Arabia, Iraq, and narrowly behind the United Arab Emirates”.
Without any doubt, the lifting of sanctions related to Iran’s nuclear program will have a relevant impact on the world oil market, the Iranian economy and Iran’s trading partners. The most significant change will be Iran’s return to the oil market, which is expected to start exporting an estimated 300,000 barrels per day immediately. Secondly, once sanctions and restrictions on financial transactions are relaxed, Iran’s trade, which had both declined in absolute terms and shifted away from Europe towards Asia and the Middle East, will expand. Thirdly, the Iranian economy, which was in recession for two years, will receive a major boost from increased oil revenues and lower trade costs. According to the World Bank, Iranian economic growth is expected to surge to about 5% in 2016 from 3% in 2015.
But the deal will likely pave the way to a sort of rapprochement between Iran and the United States, even if distrust between US and Iran still exists.
While lifting sanctions on Iran, Washington maintains separate, less comprehensive sanctions over Teheran’s missile program. America’s thaw with Iran is viewed with deep suspicion by U.S. Republicans as well as American allies in the Middle East, including Israel and Saudi Arabia. Inevitably, this opening strengthens Iran’s position in a region where most Arab countries are deeply concerned at what they perceive as Iranian Shia expansionism. Sunni-ruled Gulf states view the nuclear agreement and the lifting of sanctions as a threat and a sign that the West is getting closer to Tehran at their expense. They fear Iran could become more daring in its interventions in the conflicts in Iraq, Syria and Yemen. In this context, the fragile hope towards the end of 2015 of a Saudi-Iran rapprochement as a basis for a possible peace agreement in Syria were faded at the beginning of this year, by the Saudi execution of a prominent Shia cleric.
Nevertheless, leaving aside geopolitical considerations, what it seems to be relevant is that announcement of “Implementation Day” marks a turning point in Iranian political history, which gives Teheran the opportunity of an extraordinary transformation, reconnecting it to the global economy. Of course, for Iran the way ahead is still long, especially if we consider that some residual sanctions for other realms, such as human rights, will remain.
But, what matters is that Teheran has started to write its golden page!