Iran is preparing for the parliamentary elections to be held on February 26, 2016. Simultaneously, consultations will be held for the renewal of the Assembly of Experts. Over 6,200 candidates were accepted by the Guardian Council out of a total of 12,123 that were registered. The Iranian authorities, following the entry into force of the nuclear agreement, signed in Vienna on July 14, 2015, are waiting for all international sanctions against the country to be lifted. The International Atomic Energy Agency (IAEA) has in fact sanctioned Tehran’s compliance with the commitments made with countries of the United Nations Security Council plus Germany (P5+1).
Although members of the Republican Party in the US call upon the approval of new measures against Tehran, for the moment, a new path for the Iranian economy really seems to be opening up. Therefore, President Hassan Rouhani has directly called upon US companies to invest in Iran by exploiting the new legislation on joint ventures with foreign companies.
The effects of the end of international sanctions on the oil market
The announcement of the implementation of the Iranian nuclear agreement has already had effects on the international oil market. It has been some time since the price of oil has reached such low levels. Neither does the agreement between Saudi Arabia and Russia on the freezing of crude oil production seem able to help to significantly change this trend.
Iranian Oil Minister Bijan Zangeneh has confirmed that Tehran is ready to negotiate with members of the Organization of Petroleum Exporting Countries (OPEC), including Saudi Arabia, regarding the effects of oil prices on the international market. Iran’s return to the international oil market, with an expected production of 500,000 barrels per day, may have consequences on oil production, while OPEC countries continue to cut production levels.
The European Union has also confirmed the cancellation of the freezing of funds, approved in 2010, with regard to one of the main Iranian banks, Bank Mellat. Therefore the freeze, provided for between July 26, 2010 and January 16, 2016 of the banks payments, have ceased. This is the first significant step towards the end of the international sanctions against Tehran, which must be followed by other measures by both Washington and Brussels. According to the British newspaper The Guardian, despite the end of the sanctions, European banks are still cautious in accepting Iranian payments. Specifically, Emil Dall, an analyst at the Royal United Services Institute, added that European banks “still fear being involved” in the complex network of US sanctions against Iran.
President Rouhani's visit to Europe and foreign investments
There are many signs of a recovery of foreign investments, from many European countries, primarily from France, Italy and Great Britain, in Iran, following Iranian President Rouhani’s visit to Rome and Paris. The moderate leader expressed his hope to bring bilateral trade between Iran and Europe back to the levels prior to imposition of the sanctions.
In Italy, the Iranian delegation has signed commercial agreements amounting to a total of €17 billion. An agreement has specifically been announced with Ferrovie dello Stato Italiane [lit. Italian State Railways] for €5 billion. Iranian entrepreneurs also intend to implement economic agreements with Airbus and France’s Peugeot. Iran intends to purchase 114 Airbus aircraft, as confirmed by the Minister of Transportation, Abbas Akhoundi. During his visit to Paris, Rouhani has also discussed an agreement between Iranian automotive industry Khodro and France’s Peugeot for a value of €500 million. According to the agency Tasnim, the agreement includes a joint-venture for the manufacturing of cars in Iran.
Even Chinese and Russian investors are currently advancing. During Chinese President Xi Jinping’s visit to Tehran, a possible increase in bilateral trade amounting to $600 million was discussed. The Russian authorities would then have begun to deliver the first S-300 anti-aircraft defenses to Iran. Although the international willingness to include Iran in solving the main regional crises, from Syria to Afghanistan, now seems clear and that the end of the international sanctions are materializing, Iran’s full inclusion in the international oil market is still a long way off.
The end of the sanctions is already opening up great opportunities for Iranian manufacturing industry exports. The first positive signs of the lifting of sanctions on Iranian banks and the signing of billion-dollar bilateral agreements will have positive effects on the Iranian economy, which for years has been affected by stagnation, but will also make oil prices more volatile. Finally, the expected results of the parliamentary elections could have significant consequences on the level of opening to foreign investors in the domestic production market.