What markets will open for Iran in a post-sanctions economy?
Iran is seeking to improve relationships with countries across the Middle East, especially with the UAE. (AFP/Atta Kenare)
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Since the imposition of economic sanctions on Iran, the country has sought to broaden its economic relations with countries in the Middle East, especially with the United Arab Emirates.
The UAE is Iran’s most important trading partner. UAE Economy Minister Sultan al-Mansouri said in June that trade volume with Iran rose to $17 billion in 2014, but remains lower than the $23 billion in 2011 before the sanctions. The UAE saw a total trade surplus of $130.8 billion in 2014.
The vice-president of the Iranian Business Council in Dubai, Hossein Haghighi, has said he expected a surge in trade after the lifting of sanctions. Within the first year, total trade between the UAE and Iran is likely "to go up by between 15 and 20 percent," Haghighi said.
Building trade with Asia
Iran used its oil and gas reserves to circumvent sanctions imposed by the West, and strengthened its economic relations with Asian countries, particularly with key regional economic players such as China and Turkey.
Asia ranks first for Iranian foreign trade, receiving 87 percent of Iranian exports and providing 69 percent of Iranian imports, according to the Iranian Business Council.
Europe ranks second, receiving 11 percent of exports and providing 28 percent of imports with Iran.
But Iranian trade with the United States was flat, accounting for only 0.3 percent of exports, and 2 percent for imports.
Interestingly, Iranian trade with Africa is also weak, with the region receiving only 2 percent of exports and providing only 0.1 percent for imports. This reveals Iran’s fragile relations with Africa.
Iranian trade penetration in the Gulf countries, including Kuwait, Bahrain, and Oman, is expected to increase in the wake of the nuclear agreement.
Iran’s economy can be confidently forecast to grow sharply now that the nuclear agreement is in place.
A new map for Iranian economic relations
Experts and analysts believe that Iran will witness a huge leap in its economic relations with Western countries, as the country is expected to gain access to about $100 billion in assets that have been frozen under the sanctions.
Moreover, the end of sanctions will allow Iran to open its gates to Western companies, permitting them to work in its internal market.
Iranian economic relations are expected to evolve as follows, according to experts and analysts:
-Iranian economic relations with Arab countries will not witness a notable change, as oil and gas comprise the largest sector of the country’s economy. The sector also accounts for the largest part of Arab countries' economies as well. But Iran is expected to diversify its economy into industries and services, becoming like countries such as Turkey.
Moreover, the UAE is forecast to lose its position as the principal trading partner for Iran, and many other countries, like Turkey, will compete with the UAE for a position in this market. But Iran will have to compete with other major players in the Middle East like China, and that competition will be challenging.
-Iran will seek to import western industrial technology from the US and Europe, to which sanctions have denied it access until now.
-Iran will seek membership of the World International Trade Organization, which is dominated by the US. This will launch Iran in a new direction, in which new structural, legislative and economic reforms will be put in place.
-Iran will acquire new gas production technologies from Europe and Russia. Iran possesses the largest gas reserves in the world, which could enable it to become Europe’s main supplier of gas, as it achieves a technological upgrade.
-Europe and the US are the main players in the mining and manufacturing industries, and Iran will seek to develop trade with them once the sanctions are lifted.
However, Europe and the US will not just invest heavily in infrastructure and industry in Iran. Iran will also become a large market for consumer goods from Europe and the US, since Iran has a large population of more than 81 million.
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