Sanctions may be gone, but Iran must wait for economic recovery

Published July 16th, 2015 - 11:14 GMT

Iranian trade will be boosted by a lifting of nuclear-related sanctions but the country needs billions of dollars of investment, and meaningful economic gains are likely to take many months.

The deal between Iran and world powers announced in Vienna Tuesday paves the way to an opening for international companies who have long seen the Islamic republic as an untapped market.

However, a decade of difficulties linked to the country's nuclear programme has left problems as well as opportunities, experts say. 

With Tehran suspected of plotting to develop an atomic bomb under the guise of civilian energy production, something it has always denied, the United Nations first imposed economic sanctions on the Islamic republic in 2006.

In 2012, the United States and the European Union ratcheted up the pressure, slapping punitive measures on Iran's energy and banking sectors.

Lacking effective tools for making international cash transfers — Iran was barred from the SWIFT banking network — the economy tanked as cash dried up.

But some basic steps must be taken to turn the economy around, according to Daniel Bernbeck, managing director of the German-Iran Chamber of Commerce.

"Iran needs technological and industrial development and it will cost billions of dollars unless investors come back," he said, noting huge interest from German companies that have visited Tehran.

Iran's market of 78 million people and educated workforce were important pluses for those looking to put money into the country, he said.

The election in 2013 of President Hassan Rouhani, a moderate, signalled a change in Iran's economic policy. 

Risks and rewards

Talks with the world powers started in September that year, and an interim agreement two months later gave Iran some sanctions relief in exchange for curbs on its nuclear activities.

Those steps helped Iran exit two years of recession, with three percent GDP growth last year.

Rouhani's government, which wants foreign investment, has also managed to bring inflation down to 15 percent from 42 percent, helping stabilise the rial, which had lost two thirds of its value.

Rouzbeh Pirouz, executive chairman of Turquoise Partners, a Tehran-based investment house that has hosted hundreds of foreign business delegations, said growth chances were vast. 

"This is a historic moment ... a breakthrough opportunity for global investors to invest in one of the most exciting markets of the future," he said after the deal was announced.

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