The Emirates Policy Centre organised a workshop in Abu Dhabi last week on the latest developments emerging out of Iran following the signing of the nuclear deal and the recent completion of legislative elections. Undoubtedly, these will have significant repercussions that would further impact on the situation locally and across the regional.
Although Iran’s political situation topped the agenda at the workshop — where discussions ranged on changes that might surface in the country’s superstructure due to conflicts between conservatives and reformists — the economic scene will remain the defining factor of upcoming developments. More so after the sanctions deal and the parliamentary elections.
Obviously, Iran’s economic situation is fraught as evidenced by official reports issued by its central bank. After coming to power as successor to Ahmadinejad (who is currently accused of corruption), the Iranian president Hassan Rouhani said he received an empty state treasury. He highlighted that point when oil prices exceeded $100 (Dh367) per barrel, but now with prices sharply down, the situation is difficult to imagine.
Negative growth
Consequently, he announced that he would reduce inflation from 40 per cent in 2013 to 20 per cent by 2015 as it was cited as the cause for the decline in real income by 10 per cent.
According to the Iranian central bank, a negative growth of 6.8 per cent was recorded in 2013 and 2.5 per cent for 2014. Meanwhile, unemployment hit 30 per cent, with half of the country’s population below the poverty line due to factors such as the currency collapse and the deterioration of sectors like tourism, transportation and trade. This was caused in no small measure due to the dominance of the Revolutionary Guards and institutions affiliated to the top leadership and their control of economic activities and unwillingness to pay taxes.
Iran is currently witnessing a financial depletion due to its interference in internal Arab affairs, especially in Syria, Iraq and Yemen as well as some of the Gulf countries. It is because of providing funds to organisations and groups under its umbrella that has cost the Iranian treasury dearly and subsequently depleted its financial capabilities.
The prospects of unfreezing Iranian money held abroad and attracting foreign capital after the nuclear agreement will depend on how Iran rejects terrorism and stops intervening in others’ affairs as well as the extent to which it will develop transparent investment regulations. Foreign companies are mainly focusing on investing in the energy sector due to their fear of the intervention by the Revolutionary Guards and other institutions in the economic sector as well as their concerns over unexpected internal or regional developments.
A clear evidence of that is the French oil giant Total’s chairman statement, who said at the beginning of the month that his company would be satisfied with purchasing oil and not invest in the Iranian energy sector at present.
Cooperation
This is an indication of the debilitating internal economic situation, fuelled by the collapse in oil price and a reluctance to invest despite repetitive visits by representatives of Asian and western companies. Consequently, Iran, with its ongoing policies, will not be able to make significant changes in its economic landscape despite the sanctions removal and reformists’ winning the elections.
As a matter of fact, Iran cannot realise any far-reaching economic change without cooperation with regional countries. Such a cooperation with Gulf countries in the energy sector, for example, would contribute to maintaining fair prices and benefit all oil producing countries.
Achieving that requires Iran to pursue a policy of good neighbourliness and stop interference in the internal affairs of Arab countries. Until that be achieved, Iran will keep following the mirage of its so-called empire aspiration.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.
