With the International Atomic Energy Agency’s certification this weekend that Iran has lived up to its side of the bargain negotiated last summer with the United Nations Security Council, the country is poised to return to the international community after years of severe sanctions and diplomatic isolation. Iran’s economic growth could spurt. What will this development mean for the world economy?
Iran is a country of roughly 78 million (slightly smaller than Germany) with a nominal gross domestic product nearly as large as Poland’s. It is therefore a substantial country with significant potential both as a market and as a manufacturing center. This opportunity is not lost on European CEOs, many of whom have visited Tehran in the past year in anticipation of new deals. Even the United States is hoping to get into the act. Late last week, President Obama authorized the secretary of state to permit the sale of civilian aircraft to Iran. Tehran, smarting from US hostility and sanctions, turned immediately instead to the European-built Airbus, preparing to initiate an order for 114 of the aircraft in a deal valued at $10 billion. During the sanction years, Iran’s fleet aged, a situation that endangers civilian passengers. At a time when China’s slowdown is weighing on global exports, Iran is already going on a buying spree.
France’s Renault had been manufacturing automobiles in Iran but was forced out by US-led sanctions. Now, the company is considering buying into the country’s state-owned automobile manufacturing concern. CEO Carlos Ghosn estimates that Iran has an annual market for 700,000-800,000 automobiles, which could be increased to 1.5 million in the near future.
Iran’s reintegration into the international market is viewed as a threat by a few countries, such as Israel and Saudi Arabia, both of which tried to derail the UN Security Council deal with Iran on reconfiguring its civilian nuclear-enrichment program so as to forestall its becoming “dual use,” or deployed for weapons production. Despite the predictions of critics in these countries, Iran has faithfully met its obligations in the deal. Saudi Arabia has broken off relations with Iran, and encouraged its allies, such as Sudan and Bahrain, to do so as well, but these diplomatic moves will likely have no discernible effect on Iran. While Israel’s vendetta with Iran may continue to be played out in the US Congress, where the Israel lobbies remain influential despite their humiliating defeat on the Iran deal last summer, the rest of the world is headed to Tehran with bids and contracts. Attempts of the US media and right-wing politicians to take advantage of minor incidents like the brief Iranian detention of 10 US sailors last week for an incursion into Iranian territorial waters have fallen flat. In a world where the primary security threat is Daesh (ISIS, ISIL), Iran’s support of Lebanon’s Hezbollah and of Iraqi Shiite militias, the most effective forces fighting the so-called “caliphate,” makes it look more like a de facto US ally than like a supporter of what Washington calls terrorism.