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Iranian election outcome to have an impact on the region, oil price

GCC states expected to gain if Rouhani is re-elected, experts said

Image Credit: AP
Supporters of Iranian President Hassan Rouhani attend a street campaign ahead the May 19 presidential election in downtown Tehran, Iran.
Gulf News

Abu Dhabi: The outcome of Iranian the elections will not only have an impact on the outlook for Iran itself but could potentially affect the region and also the price of oil, experts said on Thursday.

The Islamic republic heads to the polls on Friday to elect a new president.

Opinion polls are indicating a close race between incumbent Hassan Rouhani, who oversaw the nuclear deal negotiations, and Ebrahim Raisi, a hardline cleric.

“A win by Raisi would likely be less market friendly given his close ties to the supreme leader and revolutionary guard and raise geopolitical risks in the region due to increased support for [Bashar Al] Assad in Syria and the Houthi rebels in Yemen,” Ole Hansen, head of commodity strategy at Saxo Bank told Gulf News.

Such developments would skew oil prices higher while slowing investment, he said.

They would also hit the Iranian economy hard as an increased price would do little to offset, for example the loss of access to the US market, according to Hansen.

Oil accounts for 23 per cent of Iranian GDP and represents its single largest source of foreign revenues. The country boosted its output to more than four million barrels per day after international sanctions were removed last year.

Foreign direct investment

On the other hand, re-election of Rouhani will boost the confidence of investors as the incumbent is keen to open the economy for foreign direct investment.

“If Rouhani is re-elected, we are going to see the continuity of the policies he has right now which includes opening of the economy, providing investors’ confidence and security and ensuring the banking system is transparent,” said Hamid Mojtahedi, head of Iran group, corporate structuring at Dubai based Al Tamimi & Company speaking to Gulf News by phone.

He also said large investment houses in the GCC (Gulf Cooperation Council) will look at Iran as a great opportunity to invest if Rouhani is re-elected.

“Iran is arguably the only last frontier market after the fall of Soviet Union and presents incredible opportunity for investment for GCC countries,” he said, adding that a lot of international companies who are looking at Iran will continue to look at Dubai as a hub to invest into Iran.

Dubai to gain

“They [companies] would establish themselves in Dubai and branch off into Iran because Dubai offers the infrastructure, the facilities and the logistics and with that Dubai will stands to gain. So Dubai is a jumping board into Iran but that requires political stability and a sense of status quo which Rouhani government is trying hard to bring in.”

Echoing similar views, former executive vice-president of the Iranian Business Council in Dubai said re-election of Rouhani will augur well for the country as well as for its neighbours.

“Rouhani was not only successful in signing the nuclear agreement two years ago but also brought down inflation and opened the economy for foreign direct investment. He is a better choice than Raisi,” said Hussian Asrar Haghighi.

Around 30,000 Iranian in the UAE are expected to cast their votes at the Iranian consulate in Dubai and the Iranian embassy in Abu Dhabi on Friday. The total Iranian population in the UAE is around 500,000, according to Haghighi but not everyone is eligible to vote.