Eyes are on a landmark nuclear deal with Iran that could usher in business opportunities – if it survives opposition.
Iran faces multiple international sanctions stemming from its nuclear program. In 1967, the country had acceded to the Nonproliferation Treaty (“NPT”) and in 1974 had also signed the International Atomic Energy Association (“IAEA”) Safeguards Agreement, which is supplemental to the NPT. However, the succeeding years would point to the country’s nuclear weapons ambitions – leading to concerns from the United States and the international community, and ultimately, sanctions from the U.S. government, the European Union, and the United Nations.
The United States has a long history of placing sanctions on Iran, even outside of the nuclear issue. Sanctions followed the Iran hostage crisis in the late seventies, and additional ones were imposed in 1984 following the bombing of a U.S. base in Beirut that was linked to the country. Considered by the United States as a state sponsor of terrorism, Iran faces tight restrictions on foreign assistance, arms transfers and exports.
The sanctions placed on Iran have proved costly. In lost oil revenues alone, the amount has been pegged at $160 billion. Furthermore, Iranian assets amounting to $100 billion are held out of the country, in restricted accounts. The country has also recently been in recession, with inflation up, and the unemployment rate pegged at 20%. Iranian President Hassan Rouhani had even run on a promise to negotiate on Iran’s nuclear program, toward improving their diplomatic and economic situation.
This July saw a historic nuclear deal, which would limit Iran’s nuclear weapons abilities, reduce its uranium stockpiles, and allow better access and information to international inspectors, in exchange for some relief on oil and financial sanctions. Specific elements of the deal requires years of phasing in.
The deal may pave the way for higher oil exports for Iran, which has been using tankers as floating storage for millions of barrels of oil in the past months. Some industry watchers are concerned their supplies could re-enter and flood the market. Others, however, are unconcerned for the short-term, reasoning that Iran’s underinvestment on infrastructure over the last few years had diminished immediate capacity for large exports, with current stocks partly required for domestic use. Another analyst has pointed to how Iranian oil can be absorbed by the market, with Brazil’s output less than original estimates.
The deal may also hold promise for countries and companies willing to re-establish business ties with Iran. The German economy minister and a delegation of business leaders, for example, have been sent to the country. A French shipping company will be berthing a container ship in Iran early this month, and is just one of several shipping players intending to resume calls. Other businesses and investors have also expressed interest in Iran’s potential.
In the meantime, in the United States, the deal needs to be approved by U.S. Congress. Diplomats from the countries involved in the negotiations are hard at work lobbying on behalf of the deal in Capitol Hill, in preparation for a September vote on the agreement. Opposition has been expressed on the part of Republicans, however, as well as influential Democrats like Senator Chuck Schumer and Rep. Eliot Engel, and Pro-Israel groups are also actively campaigning against the deal.
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^ Image “Handshaking Female Hand” courtesy of adamr at FreeDigitalPhotos.net