What does the new Nuclear deal with Iran mean for Western Corporates?

*The closure of the Lausanne negotiations in Switzerland this morning is without a doubt one of the largest bits of foreign policy news in recent times. However, it could also spell large news for the business community. *

*Iran has been under a state of sanctions by the United States and Western allies since 1979, when the Islamic Republic was put in place by popular revolution. Today, the sanctions are harsher than ever and have contributed to large scale economic collapse in the country. However, Iran has a lot of potential to be a large market. For one thing its 80 million citizens are well educated and nearly 55% are at working age, yet unemployment is still at around a quarter of the population. Iran’s energy reserves arguably have the best potential. Since 1974, oil output has more than halved from more than 6 million b/day to around 2.8 million b/day, despite still having the world’s 4th largest reserves. This is partly caused by the fact that the capital stock of the oil fields, some of which have been in operation for 50 years, is in sore need of reinvestment. And already, some industries have taken advantage of thawing relations. For example, more than 50 US medical export sanction waivers have been granted, showing the strong demand of companies to go after the nearly 50% decrease in exports they endured between 2012 and 2014.*

*Yet, it seems as though the new agreement is only the first step on a long road to international trade. Loud opposition from Israel, a strong US ally, and Congress, the ultimate decider in the removal of economic sanctions, makes it clear US corporations are not likely to be operating the Islamic Republic any time soon. Instead it appears as though European companies, especially oil producers such as Total and Shell, will be the ones to reap the early benefits as their governments are much more willing to cooperate with Iran. Either way, it is clear that the positives of the deal are not political in nature, but also economical.*

  • Kaan Tuncel