Lebanon seeks to reopen banking ties, bilateral trade with Iran

Published July 15th, 2015 - 09:45 GMT

The historic nuclear deal between Iran and the “5+1” Group will allow Tehran to open up its economy and lure badly needed foreign investments, and Lebanon may be one of the countries to explore such opportunities.

Although Western and Asian nations are more likely to aggressively seek multibillion deals in Tehran, Lebanese economist Ghazi Wazni said he believes the Iranian market is ripe for countless investment opportunities.

“Iran is an economic power with 77 million people, a $370-billion economy, it has the second-largest reserves for natural gas and is the fourth-largest producer of crude oil.”

Fadi Gemayel, head of the Association of Lebanese Industrialists, explained that if Iran’s market is relieved of economic sanctions, Iranians will have a higher purchasing power, and after years of being cut off economically they require consumer goods.

Wazni expects that investments will go both ways and that Lebanon will probably be more welcoming of Iranian projects in Lebanon. He recalled that an Iranian proposal for oil refineries in Lebanon was in the past rejected by the government, saying Iran’s expertise in the oil sector would be very beneficial now.

Echoing a similar view, economist Kamel Wazne said, “In the long-term it will be beneficial to the Lebanese economy if the government of Lebanon knows how to reach out to the Iranians, especially in the fields that they have a lot of specialization in, in terms of providing Lebanon with electricity and other investments that can be crucial to the Lebanese economy.”

“Certainly, today all companies worldwide are running to Iran,” Gemayel said. He claimed that Lebanese businesses already exist in Iran in traditional sectors and with sanctions removed, business between the two countries will probably expand further.

Wazni predicted several economic benefits for Lebanon in addition to the substantial investment opportunities. He said that oil prices should decline even further, resulting in lower electricity and gas prices and an improved balance of payments.

However, Nassib Ghobril, chief economist at the Byblos Bank Group, voiced more restrained predictions. “The deal, once sanctions are lifted, will provide an opportunity for Lebanese companies to explore the market.”

But he explained that he did not see significant immediate benefits to the Lebanese economy: “Today, for me to tell you exactly that there’s a positive impact on the Lebanese economy from this – no, there is [not].”

He stated that Lebanon does not produce or export what Iran’s market currently needs. According to Ghobril, other than investments in the oil and gas sector, Iran needs certain technologies they were restricted from before, which Lebanon does not produce.

However, Ghobril was more optimistic about the deal’s effects on the banking sector.

Ties between Lebanese and Iranian banks were broken with the implementation of sanctions. Ghobril said that once sanctions are removed and the Central Bank gives the green light, Lebanese banks will consider establishing relations with their Iranian counterparts.

Ghobril speculated that Lebanese businesses will not necessarily rush to enter the Iranian market at this early stage, but the restoration of relations between the two countries’ banks might lead to improved trade relations as banks can finance exports through letters of credit and guarantee. But he added that Lebanese companies must see if there is a market for their products and services in Iran, so that banks will support them.

Wazne estimated that current trade between Lebanon and Iran does not exceed $100 million, but predicted that with the right policy and emphasis on this relationship, it would grow. He added that as well as increasing exports to Iran, Lebanon can benefit from certain technologies from Iran.

According to Wazne, industries with the potential for Lebanon to tap into are agriculture, finance, transportation and the service sector, which includes banking and hotel management, where Lebanese have expertise.

Wazne stated that as a result of years of sanctions, Iran’s market is most likely greatly lacking in the fields of technology, manufacturing and hospitality. He added that Iran can benefit immensely from building its oil and gas infrastructure and automobile industry, essentially upgrading industries it already has.

Despite different predictions on how Lebanon’s economy will be impacted by the nuclear deal, there is a general consensus that the agreement is likely to bring about more political and economic stability in the region as a whole and it is that stability that should give the Lebanese economy the boost that it needs.

By Maryam Hoballah

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