Now that the JCPoA is finally being implemented, it’s money time in Iran on two different levels: It’s time for Iran to make a lot of money and it’s time for Iran to prove to the world that it will continue to be a country which deserves to be out of isolation (which will, in turn, lead to more money).
The first part is the easiest since it is built in with the deal: Once the sanctions are lifted, approximately $100 billion in frozen assets will be released and many governments and corporations who had shied away from breaking sanctions will come knocking at Tehran’s door. Sure, there is a glut in the oil market and the implementation of the JCPoA has already brought the price of oil to a new low but where there is optimism coupled with the opening of the economy, there is money to be made.
The second part is much harder since it will depend on many factors in the future: President Hassan Rouhani and his government will have to find efficient ways to muzzle the hardliners in order to make sure that they, including Supreme Leader Ali Khamenei, do not sabotage what has been achieved by using inflammatory rhetoric and provocative military maneuvers in and outside Iran.
Rouhani may have managed to strike the long-awaited deal but the billion dollar question is can he maintain it?
Money Time for Rouhani
On his election campaign over two and half years ago, Rouhani promised his electorate many promises. Most remain unfulfilled to this date but first and foremost among these promises was the lifting of sanctions and some form of normalization with the Western powers. As he said back in 2013, “Our centrifuges are good to spin only if people’s economy is also spinning in right direction“. The implementation of the JCPoA and the numerable trade delegations visiting Iran are a testament to the fact that this particular promise has finally been fulfilled.
In order to do so, he had to walk a political tight-rope which included being attacked by hardline Iranian skeptics for being too moderate in dealing with the West and simultaneously attacked by Western skeptics for not being moderate enough internally. Miraculously, he managed to pull through.
Now is Rouhani’s money time, not in the sense of dollars and rials, but in terms of political power. The JCPoA has proven to Rouhani’s electorate that he can deliver and his popularity levels are likely to soar at a critical time in view of the upcoming elections to the Assembly of Experts and the Majlis. He has shown that the 8 years of hardlining Iran’s foreign relations in order to maintain revolutionary ideals have led to isolation and poverty could be undone in just over two years of positive engagement and moderateness.
Rouhani may have silenced most of the skeptics outside of Iran but he now faces a much more immediate danger: All the hardliners, including Khamenei, have grudgingly accepted the nuclear deal since not accepting it would force them to explain to 80 million Iranians that spinning centrifuges were more beneficial to their welfare than a better economy.
The next month, is, more than ever, Rouhani’s real money time. If he manages to increase the power of moderates and reformists in both the Assembly of Experts and in the Majlis, he can dedicate the rest of his presidency to fulfilling his other promises and probably win the next elections. If he doesn’t he will be sidelined just as he was after the JCPoA was signed when Khamenei took over his responsibilities for the implementation of the JCPoA and foreign policy.
Money Time for Foreigners
Once sanctions are lifted, Iran’s economy will be opened to foreigners who want to invest, import or export in/from/to Iran. These investors originate from all parts of the globe but there are four groups that require special mentions:
- Investors from Russia: Since Rouhani began the process of negotiations with the P5+1, Moscow has become Tehran’s most influential ally. This budding relationship is based on money and power: the trade between the two countries is bound to increase dramatically while both countries have agreed to “de-dollarize” trade and deal in local currencies in an effort to bypass and weaken the US dollar which was a mainstay of foreign trade up until now. But Russia is not only a huge trading partner, it also is a source for military trade (missiles, tanks, helicopters and jets for now), a source of finance (a $5 billion loan has already been inked) and a political partner in Iran’s foreign policy. This political partnership is exemplified in Moscow’s support in dealing with the US during the negotiations and in Russia’s military involvement alongside Iran, in the conflict in Syria. Despite the fact that Ruhollah Khomeini advised for Iran to look “neither East nor West“, Rouhani is shrewd enough to understand that the support of Russia at a time when the US’s influence in the Middle East is waning will give Iran a critical edge in the future.
- Investors from the EU: Since WW2, Western European countries have been naturally allied to the US but these ties have been weakening steadily over the past decade due to the wars that the US has led in Iraq and Afghanistan, the economic crises emanating from Wall Street and the emergence of global citizenship which puts into question the current power structures. The EU followed the US in slapping sanctions on to Iran mostly out of loyalty to the US and from fear of being labelled as sanction-busters and losing American business. European countries may be worried that Iran will choose to militarize its nuclear program but they are not afraid of direct consequences as the US is: if or when Iran build a nuclear arsenal, it will force the US to get involved in order to support its allies in the region (Israel, Saudi Arabia etc…) but the EU countries are not unified in joining such a fight. In the meantime, EU corporations and governments know that a lot of money is to be made in Iran and they are in a perfect position to do so. Foreign trade delegations from Europe to Iran include Germany, France, Austria, the Netherlands, Switzerland, Spain, Italy, Greece etc…
- Investors from Central Asia: Central Asian countries such as India, Pakistan, Uzbekistan, Azerbaijan, Tajikistan etc…have eagerly awaited the lifting of sanctions in order to begin trade with their neighbor. They never felt part of the group demanding sanctions but followed along anyway in order to not suffer consequences from the US. Trade between neighbors includes two main benefits: geographical proximity and shared resources. Plans for shared ports and pipelines and tax-free zones are bound to increase once sanctions are lifted. Politically, these countries would rather remain neutral since they have thrived by doing so up until now. Countries like Azerbaijan and Pakistan may find it difficult to remain neutral politically vis-à-vis Iran due to their being predominantly Muslim but for now, money is the main goal.
- Investors from the US: US corporations will be the last in line to enjoy the benefits from the lifting of sanctions in Iran. The relationship between the US and Iran may have warmed up a bit due to the concerted efforts of President Barak Obama and Rouhani, but they are far from amicable. The US remains, according to Khamenei and his hardliners, the “Great Satan” and Khamenei banned over 200 US brands from being marketed in Iran. Furthermore, not all sanctions have been lifted and a new sanction against the testing of missiles in Iran was instated last week, and American corporations will probably choose to stay away from Iran until these issues have been cleared. Although Iranians might love some global US brands, Iranian bureaucrats will probably shy away from facilitating US investments and presence in Iran for fear of being labelled by hardliners as moderates or worse, traitors.
And still, it must be clearly understood to all foreign investors that although money is to be made, glitches and losses are to be expected in a country notorious for red tape and corruption in which the IRGC plays such a crucial role and a foreign policy which has angered its neighbors (specially Saudi Arabia) and hardliners who are eager for more crackdowns.
Money Time for Iranians?
The JCPoA was meant to make the lives of the Iranians better. Without the crippling sanctions, the economy of Iran is bound to become empowered and the benefits are meant to trickle down to the average Iranian in the future.
Unfortunately, the benefits of the JCPoA are bound to reach the Iranian populace only in the mid-far future for several reasons:
- First and foremost, such developments take time to reach the lives of each and every Iranian: debts have to be paid, infrastructures to be financed and much of the money that is to be unfrozen is already “spoken for”.
- Second, Iran’s continued and growing involvement in conflicts in the region, predominantly Syria and Yemen, are extremely costly: It’s estimated that Iran is investing approximately $10 billion a year in Syria alone for the past 4 years and although Tehran repeatedly played down these expenses, the head of the IRGC has gone on record to state that over 200,000 troops are supported by Iran in the region.
- Third, and most significantly, Iran’s economy is predominantly ruled by the IRGC and its myriad of companies and organizations. The IRGC was probably
the biggest benefactor of the sanctions since it managed to turn Iran’s isolation into profitable self-sufficiency.
The low price of oil is bound to lead Rouhani to look for other ways to boost the economy and he will be probably forced to raise taxes which will mean that Iranians might actually suffer at first before they will begin to enjoy the fruits of the nuclear deal.