The first positive results have materialized for the Iranian economy following the end of the international sanctions, announced last January following the signing of the nuclear agreement, reached in Vienna on July 14, 2015. Yet the Iranian authorities seem to be awaiting two very important elections to get behind the long page of international measures which, since 2003, have isolated the country. On the one hand, the presidential elections next autumn in the United States seem crucial to the fate of the Vienna agreement, as they could reaffirm the political role of the Republicans, which have always opposed an agreement with Tehran and are favorable to the imposing of further sanctions, while, on the other hand, the presidential elections of May 2017 in Iran could mark the return of the ultra-conservatives, with the announced candidacy of former president Mahmud Ahmadinejad, and therefore downsize the political role of the moderate President, Hassan Rouhani. Not only that. While the European banks have partially thawed Tehran billions of euros, blocked for years due to the sanctions, the U.S. banks have still not done the same, as they are reluctant to regain confidence in the country of the ayatollahs. Moreover, the lack of effective contractual models has often discouraged new foreign investments, especially in the oil industry, which is still not very competitive in relation to the technology used in Iran compared with other countries active in the sector.
The increased production and export of Iranian oil
According to Reuters, Iranian oil exports increased from 1.3 million barrels per day last year to 2.1-2.3 million barrels of oil per day in the period May-April 2016. The pre-sanction export levels were 2.5 million barrels of oil per day. As regards production levels, following the imposition of sanctions, Iran increased from 4 million to 2.7 million barrels of oil per day, while the estimates of the Iranian Ministry of Oil indicate an expected level of production for 2016 of 3.8 million barrels per day, therefore very close to the level prior to the sanctions when Iran was the second largest oil producer within OPEC. This increase could still exceed the country’s production capacity. For this reason, according to estimates, Tehran could attract foreign investments equal to at least $100 billion in order to revive its oil and gas industry. Moreover, as many as 25 European and Asian countries (Reuters data) are transporting Iranian oil abroad. This is enabling the limits imposed by the sanctions to be exceeded faster than expected. Until last April, the Iranian authorities encountered many obstacles to exporting local oil. However, some international companies remain skeptical about the possibility of doing business with the authorities of Tehran, especially due to the continued restrictions imposed by the United States. However, the Iranian authorities do not seem to want to stop here. Oil Minister Bijan Namdar Zanganeh has promised new plans for exploration of oil fields located in the south of the country. There are at least a dozen international companies that could be involved in the revival of the sector. However, Ali Kardor, Director of the National Iranian Oil Company (NIOC), has confirmed that the foreign companies involved are mainly European and Asian.
The limits imposed by U.S. banks
“The attitude of the United States compared with the end of the sanctions against Iran is very effective and runs to the rescue of the ultra-conservatives”, Riccardo Redaelli, Professor at the Catholic University of Milan, told Abo. U.S. banks remain the most reluctant to lift the sanctions against Tehran. A meeting that was to take place in London last spring between representatives of the Iranian Central Bank and the U.S. Treasury has been postponed until a later date. Not only that, but the Financial Action Task Force (FATF), which includes 37 countries that monitor money laundering around the world, has decided to keep Iran on the blacklist of high-risk countries. However, the FATF has referred to “Iran’s high-level political commitment” to the adoption of a plan of action that in twelve months could allow for the country to be removed from the blacklist. According to the Iranian authorities, this could “normalize the national banking industry” and facilitate transactions between Iranian and foreign companies. The first effects of the end of sanctions against Tehran are starting to show in the Iranian oil market. The increase in oil export and production levels, which are close to the pre-sanction figures, bode well for the country’s economic recovery, an economy that was hit hard by ten years of international measures. Not only that. The slipping of the agreement for the freezing of OPEC production levels could further benefit the Iranian authorities. However, the elections of autumn 2016 and those of next year, along with the reluctance of the U.S. banks to lift the international sanctions, could bring back the question of Tehran’s rapprochement to the international community.