Iran economic sanctions slow growth but won't stop spurt in second-largest Mideast market

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    Feb 2014
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    Critics of the nuclear negotiations with Tehran have been warning for months of the dire consequences of lifting economic sanctions, but many predict that Iran’s economy is poised for a significant growth spurt no matter what the outcome of the talks.

    With the Middle East’s second-largest consumer market after Egypt, a young and Internet-savvy population, a vast oil and gas resource base and a critical location, Iran is finding partners lining up to strike deals and investments despite the sanctions.

    “The Iranian economy will grow even without a deal. It’s not going to depend on the lifting of sanctions. It will just grow and develop at a slower pace,” said Bijan Khajehpour, a managing partner for the Austria-based consulting firm Atieh International.

    He made the prediction at a recent roundtable discussion about Iran’s economic prospects at the Washington-based Woodrow Wilson International Center for Scholars.

    Officials from China, Russia, France, Britain, the U.S. and Germany gathered with an Iranian delegation in Vienna this is month for a sixth round of talks ahead of a June 30 deadline to settle an agreement on curbing Iran’s nuclear program in exchange for the phased lifting of economic sanctions.

    Iran’s gas production and oil export revenues will rise and inflation and unemployment will be sharply reduced over the next few years whether or not a deal is reached, Mr. Khajehpour said.

    Analysts also say that the lifting of sanctions would provide a major stimulus for Iran’s economy. A deal would accelerate economic development and private job growth that could lead to increases in gross domestic product of about 7 percent a year by 2018. It also could unfreeze $120 billion in assets that would “be at the disposal of the Iranian central banks and the government,” Mr. Khajehpour said.

    He predicted that a deal with sanctions relief would enable Iran to produce 400,000 barrels of oil per day, a return to mid-2012 levels, by early 2017.

    The sanctions had an immediate and negative effect on Iran’s economy, which was worsened by a slide in global oil prices.

    After growing by nearly 4 percent in 2011, Iran’s GDP contracted by 6.6 percent in 2012 and another 1.9 percent in 2013, according to the World Bank.

    The official unemployment rate peaked at 14 percent in 2013, and many analysts say the real number was considerably higher. The jobless rate remains at about 10 percent even with the recovery.

    Under President Hassan Rouhani, the economy grew by about 3 percent in 2014 but is projected to average an unimpressive 1.4 percent growth rate annually over the next three years. That hasn’t stopped Western business groups from reaching out to Iranian partners in anticipation of the day the walls come down.

    The Iranian IRNA news agency reported Wednesday that U.S. and European venture capitalists are scouting Iranian startup firms for potential investments in the months ahead.

    “We started getting a lot of interest from foreigners” in the days right after an interim agreement between the U.S., its allies and Iran was announced in early April, Faty Amir Soleimani, an Iranian entrepreneur who runs an e-commerce site for baby products called Koodakoo, told the wire service.

    “When I say ‘a lot,’ it was really a lot,” she said.


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