In what President Hassan Rouhani hailed as a “golden page” in the country’s history, crippling international sanctions on Iran were lifted on Saturday (January 16) after a watchdog verified that Tehran had complied with a deal to curtail its nuclear programme.
The benchmark nuclear deal was struck on July 14 between Iran and the five permanent members of the UN Security Council plus Germany (P5+1).
As the International Atomic Energy Agency (IAEA) confirmed that Iran has kept its promises on reducing its enriched uranium stockpile and the number of centrifuges, as well as dismantling a heavy-water reactor near the town of Arak. Most UN sanctions resolutions passed between 2006 and 2010 were removed automatically.
The US suspended some of its sanctions including the ones in the banking, steel and shipping sectors. The EU terminated all nuclear-related economic and financial sanctions against the Islamic Republic.
Treasure unlocked for Iran
The implementation of the nuclear deal brings much relief to the Islamic Republic, which had reeled under the economic sanctions.
Analysts say the country can now recoup more than $100 billion in assets frozen abroad and it gets access to world markets.
“The imposition of extensive sanctions and trade restrictions on Iran crippled its economy in the past few years, particularly in the financial and energy sectors, significantly affecting the day-to-day lives of local Iranians and their businesses, in addition to foreign companies and individuals with an interest in investing in the country,” says London-based sanctions lawyer Sarosh Zaiwalla.
The implementation of the JCPOA marks a historic moment in Iran’s re-engagement with international markets and is also an important step towards recovering diplomatic ties, adds Zaiwalla while referring to Joint Comprehensive Plan of Action, the agreement reached between Iran and the world powers on the nuclear programme in Vienna last year.
The country with the fourth-largest oil reserves had lost several billions of dollars in revenue since its 700,000-barrel-a-day crude oil output was taken off the market in 2012 when the average barrel price hovered around $110 per barrel.
The oil producer has already announced plans to increase its exports following the lifting of the sanctions. Tehran’s Shana news agency quoted Deputy Oil Minister Amir Hossein Zamaninia as saying on Sunday that Iran is ready to increase its crude oil exports by 500,000 barrels a day.
Companies across the world will be able to start or resume business in the country in almost all sectors that suffered a major setback following the sanctions.
Just a few hours before the sanctions were eased, Iran had struck a deal with Airbus consortium in Europe to buy 114 new passenger planes.
What does it mean for the region?
The lifting of sanctions comes at a time when Saudi Arabia and Iran are engaged in a rift over the violent attacks and torching of Riyadh’s diplomatic missions in the Islamic republic in response to the Sunni-majority nation’s execution of top Shia Muslim cleric Sheikh Nimr Al Nimr and 46 others after they were convicted of terror-related offences.
So, one could expect that the tension may flare up as the OPEC comes to review oil production quotas following Iran’s announcement of a hike in crude output. However, analysts feel that the deal will be in favour of both Iran and most of the economies in the region.
The UAE-Iran trade reached $23bn in 2011 before the sanctions but it dropped to $17bn in 2015.
Zaiwalla says that the UAE will be the first beneficiary of the Iranian nuclear deal in the region.
Mehrdad Parhizkar, Partner at Frontier Partners, says, “Within the first year of the lifting of sanctions, total trade between the UAE and Iran is likely to increase by between 15 and 20 per cent.”
The deal is also expected to boost Iran’s trade with Oman and Qatar.
“Oman is likely to become a major hub for the transit of goods from Iran to other countries and vice versa,” argues Parhizkar.
“Although Qatar will be worried that Iran will increase its extraction of natural gas in the shared South Pars fields, it will continue its good relations with Iran. Iran will increase its exports of food and agricultural products, seafood, minerals and construction materials to Qatar. Iran will also pursue its intention to set up a joint free trade zone with Qatar,” Parhizkar states.
Oil outlooks upset
Many countries and major companies welcomed the lifting of sanctions, but the oil market, obviously, was not happy.
On Friday, the benchmark Brent crude tumbled below 29, the lowest in more than a decade, as the removal stoked fears of Iran’s flooding of oil market, which is already hit by oversupply.
Stock markets across the world fell in response to the slide in oil prices.
Major bourses in the Middle East nosedived in early trade on Sunday with Saudi Arabia’ Tadawul plunging more than six per cent. While Dubai’s and Abu Dhabi’s benchmark indexes were down 5.2 per cent and 4.1 per cent respectively.
Update: Oil further dropped in price on Monday, with Brent reaching $27.7 a barrel, just one day after the publishing of this article.