With US sanctions lifted, can Iran become the next economic superpower in the Middle East?

Published: January 20, 2016
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US and Iranian officials in Lausanne including John Kerry, second left, and Mohammad Javad Zarif, second right. PHOTO: AFP

The 61 years of diplomatic relations between Iran and the United States have almost always been problematic. Iran’s mistrust dates back to the joint US-British intelligence design of 1953, aimed at overthrowing Prime Minister Mohammad Mossadeq, whose goal to liberate Iran’s oil industry from British colonial rule delivered a death blow to Western economic interests.

The Iranian Revolution of 1979 spurred nearly a decade of hostile anti-American sentiment, and since 1995, the United States has placed various sanctions to restrict Iran from practicing economic, scientific and military trade with major global powers. Since 2006, the United States and Israel have championed eight United Nations Security Council resolutions in total, to deter Iran from going nuclear.

However, sanctions worth $100 billion were officially lifted on January 16, 2016, on the condition of Iran curbing major aspects of its nuclear program. Thus, after decades of global inaccessibility, a renewed Iranian resolve is most likely to help the country recover its lost potential, and reclaim its position as a regional giant.

What would the lifting of sanctions mean for Iran and the Iranian public?

Oil and the Iranian economy

Alarming rates of inflation and unemployment have held the nation’s economy hostage ever since the sanctions were put into effect. According to a recent World Bank report, the annual rate of inflation stood at 15.6 per cent in June 2015, owing to stagnated foreign investments and deteriorating agricultural supply budgets.

With a relief in restrictions, Iran is estimated to triple its supply of oil to about $3 million barrels a day. As per the International Monetary Fund (IMF) predictions for 2016-2017, Iran’s restored access to foreign assets are expected to lift real GDP from about four per cent to 5.5 per cent next year.

Interestingly, despite the domination of Saudi oil in the region, a prevailing negative trend in global oil prices allows Iran to penetrate the monopolised trend. According to World Bank, Iran should be able to lead a 14 per cent dip in circulating oil prices, while receiving a surplus revenue of $15 billion in oil.

As exports of the resource have accounted for nearly 80 per cent of Iran’s total public revenue, the country’s revived trade-connections with the West would reduce inflation rates significantly.

An important point to note, is that the country’s working class accounts for 45 per cent its total labour force. As Iran gets access to approximately $56 billion in frozen assets from the Barack Obama administration, it can utilise these funds for the enhancements of existing oil and gas fields. These enhancements, coupled with the resurrection of domestic car-manufacturing and pharmaceutical industries, would create employment opportunities for 62.8% of the national labour force, which has been economically inactive since 2014.

Regional clout and diplomatic warfare

Iran’s ruling government is solidly placed with its people. However, it is also well aware of the highly vigilant and empowered civilian cluster of society, which would hold the regime answerable to its needs if it tries to single-handedly represent Iran’s wits for a better future.

A floodgate of transnational trade would enable Iran to develop links with numerous notable powers, through a purely independent identity. Unlike its fellow adversaries, Iran shall look to counter regional hostility by rendering itself economically indispensible to the West, rather than forging warmongering-alliances with the same powers, and suffer the dire consequences.

As a result, Iran’s road to dominance in the Middle East is likely to be inspired by rational thought and soft-power projection. Little evidence in Iran’s foreign policy calculus reveals immediate threats to warfare, and as opposed to its regional competitors from Israel to Saudi Arabia Iran is least likely to mistake military might for strategic triumph.

Thus the Iranian government, along with the Iranian public have something to rejoice about, but the lifting of sanctions on Iran has spurred mixed reactions from various world leaders.

Israeli Prime Minister Benjamin Netanyahu was reported to have said,

“What a stunning, historic mistake. Israel is not bound by this deal with Iran, because Iran continues to seek our destruction, and we will always defend ourselves.”

Whereas US Secretary of State John Kerry said,

“The fact is that the agreement we’ve reached ― fully implemented ― will bring insight and accountability to Iran’s nuclear program, not for small number of years but for the lifetime of that program. This is the good deal that we have sought. Believe me, had we been willing to settle for a lesser deal, we would’ve finished this negotiation a long time ago.”

Iranian President Hassan Rouhani said,

“The page of the past 12-year period, which was accompanied by illusions from world powers, and the spreading of these illusions in society and public opinion, has completely turned, and a new chapter has begun.”

To conclude, I deem the relief in sanctions a blessing in disguise for Iran. True, its nuclear program has now been brought under stringent global scrutiny, but more importantly, the lifting of sanctions will enable Iran to maximise its economic independence for regional leverage.

I would also draw attention towards over a decade of economic and political isolation, which has helped Iran maintain its internal resolve as a nation the blueprint for becoming the next giant economy in the region.

Hannan Hussain

Hannan Hussain

The author hails from the United States and is currently pursuing his bachelors honours in Public Administration from NUST. He is an avid reader and is the author of And the Candles Blew. He tweets as @hannanhussain7 (twitter.com/hannanhussain7)

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.

  • cautious

    Maybe – but large oil reserves don’t necessarily equate to healthy economies – ask Venezuela and Russia. Also – don’t forget that oil prices might continue to decline down to a 1/4 of per-sanction prices so even if Iran increases oil output it may have to struggle.Recommend

  • Miyagi Jr.

    “With US sanctions lifted, can Iran become the next economic superpower in the Middle East?

    NO.Recommend

  • Parvez

    Honest answer is…….very unlikely. It has too many factors working against it for it to achieve that status.Recommend

  • Kickass

    I have yet to see a logically and realistically analysed article in any newspaper about the US Iran ” deal”. Suddenly our great writers and reporters have gone brain dead and are just talking about the report and dare not the factual background. Why this sudden love lost?Recommend

  • Allah Hafiz

    Yes ,Why not…even we afghanis and iranis will do business with chahbaar port….Think of this…pakistan is only going and talking to arabia and iran…while Indian Iran and Afghanistan in tripatriate partnership are not only building port of chahbaar…but Indians also building and leased Oman port..Afghanistan,Iran and India will be doing large business with Middle east than..and moreover pakistanis export are way lower than bangladesh i.e around .5 times lower…..50% lower….and forex reserve of pakistan mashallah……Hence Iran will become a good economy along with afghanistan….pakistan will be chinese colony and seconf fiddle…Recommend

  • Jilla

    The Persian culture is great…. unlike the nomadic Arabs from saudia….

    They will remember therifriends who helped them during the worst days and continued to trade and help them…..Recommend

  • Jilla

    The Persian culture is great…. unlike the nomadic Arabs from saudia….

    They will remember therifriends who helped them during the worst days and continued to trade and help them…..Recommend

  • Max

    There will be no Peace in Afghanistan and iraq based on past experience.Taliban is good for afghanistan as they yeil danda and similarly dictator like saddam is good for iraq.Afghanistan is the biggest enemy of pakistan from the day first.You came into our land ,you eating our food and wants freindship with India.You have no honour.You will remain cursed till the end of times
    thanks to our forefathers migrated to afghanistanRecommend

  • Miyagi Jr.

    Still No,
    Like Max said, Afghanistan is cursed, very true, but for different reasons I do not want to discuss here. Saudi Arabia will never let Iran prosper.

    Allah Hafiz.Recommend

  • stevenson

    It’s not about whether Persian culture is great or Arab culture is great. Both are suffering. When you look at the hundreds of thousands of refugees smuggling themselves into Europe to beg for asylum because of fears in their homeland, you will see Arabs and Iranians as well as Muslims from Afghanistan, Somalia and others.Iran may have sanctions lifted but apart from oil, they have limited exports. With oil prices dropping more by the day, the Iranians are desperate to dump even more cheap oil which won’t help them. They will need to diversify like all Muslim countries but no one in the West is keen to invest in unstable countries and there are fears of revolution in Iran by the young generation who want to end the theocratic state but have been repressed.Recommend

  • stevenson

    The problem with Afghanistan is that they are too busy being pawns of India instead of doing what is best for common Afghans. Decades of being a puppet for India has only brought misery to the people there. Iran’s development will be good for Pakistan especially with the Iranian Port Chabahar being twinned with Gwadar. Chahbahar is not a deep sea port of the same capacity as Gwadar but it will allow Gwader to join a regional link with Iran to the Middle East and onwards. It’s good if the Indians, Oman and others all invest in Chahbahar because in the long term, what is good for the region, also helps Pakistan.Recommend