- The Washington Times - Sunday, June 14, 2015

Critics of the nuclear negotiations with Tehran have been warning for months of the dire consequences of lifting economic sanctions, but many predict that Iran’s economy is poised for a significant growth spurt no matter what the outcome of the talks.

With the Middle East’s second-largest consumer market after Egypt, a young and Internet-savvy population, a vast oil and gas resource base and a critical location, Iran is finding partners lining up to strike deals and investments despite the sanctions.

“The Iranian economy will grow even without a deal. It’s not going to depend on the lifting of sanctions. It will just grow and develop at a slower pace,” said Bijan Khajehpour, a managing partner for the Austria-based consulting firm Atieh International.

He made the prediction at a recent roundtable discussion about Iran’s economic prospects at the Washington-based Woodrow Wilson International Center for Scholars.

Officials from China, Russia, France, Britain, the U.S. and Germany gathered with an Iranian delegation in Vienna this is month for a sixth round of talks ahead of a June 30 deadline to settle an agreement on curbing Iran’s nuclear program in exchange for the phased lifting of economic sanctions.

Iran’s gas production and oil export revenues will rise and inflation and unemployment will be sharply reduced over the next few years whether or not a deal is reached, Mr. Khajehpour said.

Analysts also say that the lifting of sanctions would provide a major stimulus for Iran’s economy. A deal would accelerate economic development and private job growth that could lead to increases in gross domestic product of about 7 percent a year by 2018. It also could unfreeze $120 billion in assets that would “be at the disposal of the Iranian central banks and the government,” Mr. Khajehpour said.

He predicted that a deal with sanctions relief would enable Iran to produce 400,000 barrels of oil per day, a return to mid-2012 levels, by early 2017.

The sanctions had an immediate and negative effect on Iran’s economy, which was worsened by a slide in global oil prices.

After growing by nearly 4 percent in 2011, Iran’s GDP contracted by 6.6 percent in 2012 and another 1.9 percent in 2013, according to the World Bank.

The official unemployment rate peaked at 14 percent in 2013, and many analysts say the real number was considerably higher. The jobless rate remains at about 10 percent even with the recovery.

Under President Hassan Rouhani, the economy grew by about 3 percent in 2014 but is projected to average an unimpressive 1.4 percent growth rate annually over the next three years. That hasn’t stopped Western business groups from reaching out to Iranian partners in anticipation of the day the walls come down.

The Iranian IRNA news agency reported Wednesday that U.S. and European venture capitalists are scouting Iranian startup firms for potential investments in the months ahead.

“We started getting a lot of interest from foreigners” in the days right after an interim agreement between the U.S., its allies and Iran was announced in early April, Faty Amir Soleimani, an Iranian entrepreneur who runs an e-commerce site for baby products called Koodakoo, told the wire service.

“When I say ‘a lot,’ it was really a lot,” she said.

U.N. sanctions were placed on Iran in 2006 after international concerns mounted over the country’s suspected nuclear weapons programs. The Iranian economy — damaged further by the policies of President Mahmoud Ahmadinejad — suffered immensely as a result, leading to high inflation levels, low currency values and deep economic stagnation for local businesses, investors and middle-class Iranians.

Not just sanctions

Mr. Khajehpour estimated that only about 20 percent of Iran’s economic problems were related directly to the sanctions. Although a deal suspending the sanctions would undeniably benefit Iran’s economy, he suggested that the government would be better off focusing on improving its domestic political woes and investing in infrastructure and energy efficient programs, among others.

Opponents of the deal say an agreement would help strengthen Iran’s economic influence and political prowess in regional and global affairs. It also could pour billions of dollars in additional revenue into the government’s coffers to fuel what critics say is a strategic campaign to confront Israel and destabilize regional rivals such as Saudi Arabia.

Former Sen. Evan Bayh, Indiana Democrat, said the deal could give Iran more financial muscle to use against U.S. allies and interests in a critical region.

“They’re a state sponsor of terrorism, and giving someone like that tens of billions of dollars will lead to adverse consequences,” he said. “If you give them access to a lot of money, some of that will find its way into Syria, into Yemen, to Hezbollah and a variety of other places that are not in our best interest.”

President Obama and others defending the negotiations say Iran is far more likely to spend any money it earns from the end of economic sanctions to rebuild its economy and rebuild its domestic infrastructure, not to finance foreign adventurism.

In an interview last month just before a Camp David summit with nervous Sunni Arab leaders about the Iran deal, Mr. Obama told the Saudi-owned newspaper Asharq al-Awsat that there was no way to know how a nuclear deal would change Iran’s political and economic dynamic but said a more open Iran would be less interested in financing foreign forces hostile to the U.S.

“If we can successfully address the nuclear question and Iran begins to receive relief from some nuclear sanctions, it could lead to more investments in the Iranian economy and more opportunity for the Iranian people, which could strengthen the hands of more moderate leaders in Iran,” Mr. Obama said.

But one of Mr. Obama’s chief military advisers said he had a less-optimistic view.

Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, said during a recent visit to Jerusalem that he “shared the concern” of his Israeli hosts that Iran could funnel some of its newfound wealth to Hezbollah and other surrogates hostile to Israel.

“If the deal is reached and results in sanctions relief, which results in more economic power and more purchasing power for the Iranian regime, it’s my expectation that it’s not all going to flow into the economy to improve the lot of the average Iranian citizen,” Gen. Dempsey said.


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