Assessments have varied over Iran’s economic returns after the signing of the nuclear deal with the six world powers (P5+1), and the gradual lifting of sanctions that have seriously weakened its economy.
The sanctions put the regime at serious risk, especially after the collapse in oil prices and the significant surge in Iran’s financial commitments due to its involvement and support of allies in Syria, Lebanon, Iraq and Yemen, thus costing the Iranian people dearly.
This issue needs an objective perspective far from media hype, which accompanied the efforts to reach a nuclear agreement and the reactions of those, especially from Europe, who flocked to Tehran to win contracts for upcoming projects. However, it is not that easy and European leaders will not easily get what they want.
Iran is not better off today due to difficulties arising from sanctions, wastage of funds, corruption and maladministration that has lasted for years. The religious parties are masters in sabotage and creative vandalism more than in construction.
Under the rule of the Supreme Leader and the rule of the jurist — known as ‘Welayat Al Faqih’, which gives the person absolute authority — the economy has seen efforts channelled towards military-supporting industries mainly at the expense of employment opportunities for the people.
In this regard, billions of dollars were wasted in an attempt to build a nuclear arsenal that no one can use at present, while those like North Korea exploited Tehran’s passion to achieve astronomical profits. Valuable funds were also spent in developing 5,000-kilometre range inter-continental ballistic missiles.
Iran’s ambitions put up big question marks. Does Iran need this range that can reach Europe? Reaching Israel, other Arab countries and Turkey — which are potential “enemies” of Iran’s religious leaders — does not require more than a 2,000-km range at most. This makes it difficult to explain the foolishness of Iranian leaders.
Therefore, the economy is in tatters, the wealth collected over the years of high oil prices were squandered on armaments and military support of failed countries, terrorist organisations and arms trafficking to neighbouring countries.
Estimates show Iran’s getting $150 billion (Dh550.5 billion) of its frozen assets. However these funds will be disputed over by power centres in Iran and not put in one direction. A portion will be spent on economic projects to calm the people’s anger who have begun asking questions about the feasibility of supporting failed states such as Syria, Iraq and Yemen, as well as terrorist organisations such as Hezbollah, Al Houthis and subversive organisations in the Gulf, as referred to by a senior US official in the White House during the visit to Washington by King Salman Bin Abdul Aziz of Saudi Arabia early last month.
“We understand that Saudi Arabia has concerns about what Iran could do as their economy improves from sanctions relief,” Ben Rhodes, Obama’s deputy national security adviser, said.
Meanwhile, other funds will be channelled into military industries and missiles, submarines and aircraft carriers, as if Tehran’s jurist regime considers Iran a global superpower!
Yet, the most important part will be shared by corrupt circles in Iran, including the Supreme Leader — a tycoon owning a portfolio of real estate, including some of Mohammad Reza Shah Pahlavi’s confiscated palaces.
Accordingly, the Supreme Leader will get the lion’s share as he is considered a Sayyid , which is generally used among Shiite Muslims claiming to be related to Prophet Mohammad (PBUH) through his daughter Fatima’s marriage to Ali Ibn Abi Talib. Another share will go to the Revolutionary Guards and its various terrorist and sectarian activities as well as to religious centres.
Furthermore, the $150 billion will not make up for Iran’s loss, which is double this amount, due to the fall in oil prices from $147 a barrel in June 2014 to less than $50.
If Iran got the funds in better conditions it would have invested it in various fields. So, what is the secret behind the western countries’ scramble to Tehran? This question is raised despite the fact the East has not severed its economic relations with Iran.
Certainly there are commercial and economic gains to be generated for the western countries because Iran is a large regional power and its economy is capable of viable investment opportunities.
For example, Iran is the largest auto market in the Middle East, but many sectors and public utilities, including services, were affected by the penalties on the one hand and by poor governance on the other.
Therefore, Iran needs to attract more foreign capital, keeping in mind such investments will focus on the most profitable sectors, namely the oil and gas and infrastructure projects.
However, they will not find a friendly-investment environment, and will have to deal with conflicting interests.
As the frozen funds get shared, there will be a struggle for foreign company generated contracts and net millions of dollars in commissions, as evidenced in totalitarian and corrupt regimes. The experience of Iraq is the closest example to what will happen, although Tehran is trying its utmost by using its influence to protect former Iraq prime minister Nouri Al Maliki after the Iraqi people called for his and cohorts’ trial over corruption. (Al Maliki’s clan is headed by Iraq’s Chief Justice Medhat Al Mahmoud.)
This was a public demand that Tehran considered a red line.
So, dealing with this corrupt bureaucratic system is not easy, and there will be complexities facing foreign investors.
This is in addition to Iran’s continuing strained relations with neighbouring countries, especially with the Gulf, over its support for terrorism. Such an environment can lead to an outflow of foreign investment, along with raising popular discontent over the waste of national funds and discrimination in the complicated mosaic of Iran’s ethnic population structure.
Besides oil and gas and infrastructure, there will be significant opportunities in trade, especially given its citizens’ thirst for all kinds of goods. There will be many areas to develop trade ties with Iranian businesses, and the Gulf’s ports will benefit from opportunities of moving goods to a market of 78 million people and an economy in need for more goods.
This requires an understanding of the security needs of both sides, non-interference in internal affairs and a policy of being good neighbours.
The statement by Iran’s Foreign Minister Mohammad Javad Zarif contradicts statements by the Supreme Leader and his aides. The quantity of weapons that were smuggled into Bahrain and Kuwait from Iran truly reflects Tehran’s aggressive intentions.
The seized arms in Kuwait is estimated at 19 tonnes of various types of weapons and 140 kilograms of explosives, which obviously shows that the aim is not only to sabotage, but clearly intended to overthrow the ruling regime and seize power by Iran’s agents.
Iran’s economy suffers from major structural defects as manifested in the oil sector, which is dysfunctional because of sanctions and the need for modernisation. Also, the infrastructure sector suffers from a severe shortage, while its transport is outdated and dates back to the 1970s, a fact that can clearly be drawn from the number of planes that have crashed from time to time.
There is also the high rate of inflation of up to 40 per cent, though President Hassan Rouhani promised to reduce it to 20 per cent when he took up office. This contributes to reducing purchasing power and lowering standards of living, while the unemployment rate exceeds 30 per cent.
However, this is alarmingly high among the youth, and there is popular discontent caused by the fact that nearly half of the population lives under the poverty line in a country rich in natural resources.
The Iranian currency toman has lost most of its value, leading businessmen and investors to smuggle funds abroad. This will not encourage foreign capital due to the monetary instability, coupled with restrictions imposed on foreign transactions and the freezing of assets of senior leaders and putting them on blacklists in many countries of the world.
Such political, economic and security complexities will significantly reduce Iran’s benefits from the lifting of sanctions. Thus, western countries and companies need to be cautions over prospects.
Therefore, Iran’s contribution to reducing tension in the region and adoption of the policy of being a good neighbour are no less important for its economic future than the cancellation of sanctions.
In fact, security and development are two sides of the same coin, and will not work by separating them. However, this requires convincing the radical regime in Tehran of the importance of this approach and the need to abandon its attempt to drag the region into an arms race, which will ultimately lead to the collapse of the Iranian regime, as was the situation in the run up to the dismantling of the Soviet Union.
However, there will be significant positive developments in lifting sanctions. The banking and financial institutions will gradually integrate into the global financial system. The currency will recover some of its value, and oil and gas production will increase and inflation fall.
There will be hundreds of thousands of new jobs, while key sectors that need radical reforms and significant investments will be able to recover, such as for tourism and air transport.
As a result, Iran’s gains from sanctions’ removal will depend heavily on its political, economic and military approach in the upcoming period. The more Tehran cooperates with its neighbours, the more it will benefit from the nuclear agreement. If Iran responds positively to the terms without equivocation and dilatory attempts, it can harness the results to serve its people and induce development.
But if Tehran resorts to straining the atmosphere, breach the agreement and interfere in others’ affairs as well as continue financing acts of sabotage, it will greatly reduce its benefits.
Moreover, the Iranian people, who have paid dearly for the radical, aggressive and backward policies will again pay the price.
