Iran has significant economic potential that has so far been kept in check by sanctions. So once these sanctions are lifted, Iran can immediately begin to engage economically with the world once more. •2• The mass unfreezing of global assets When the sanctions were first imposed, up to $100Bn of Iran’s money became frozen in foreign banks. In 2013, for example only $30-50Bn of Iran’s foreign exchange reserves were readily accessible. But as part of the sanction relief scheme, Iran’s frozen funds will be released, freeing between $29-100Bn. Crucially, though, it’s specified that these unfrozen funds are to be used to finance Iran’s domestic investments. To encourage a steady and sustainable financial recovery, they’ll be kept abroad until required. •3• The price of oil Here’s one area on which the economists cannot yet seem to reach an agreement. Once the sanctions are lifted and Iran is free to export oil once more, will the price of oil rise or fall? Some US economists believe that Iran could reduce the world price of crude petroleum by 10%, which would save the US up to $76Bn a year. This in addition to the economic boon that would spring from competitive US multinational firms operating in the Iranian manufacturing and service sectors. However, it’s also been proposed that a powerful Iran could serve to double the price of oil, which would cause the US GDP to fall by up to 2.5%, plunging the country into recession. It must be remembered that these predictions are based on the notion that Iran might have nuclear weapons. Given that this is expressly forbidden by the terms of the agreement reached with P5+1, such alarmist thinking might now be taken with a pinch of salt – if not dismissed outright. Yet in any case, whether the price of oil rises or falls once the sanctions are lifted, all seem to agree that things will look very good indeed for Iran. The World Bank believes that Iran’s strong position in the world oil market could cause their economic growth to surge to 5% in 2016.
•5• A new goldmine for foreign investors The sanction relief scheme will allow foreign firms to invest once more in Iran’s many lucrative sectors, including oil, gas, automobile, electronic, infrastructure, and others. As a result, European companies are already taking decisive steps to enter the Iranian market. Investors have apparently already fully booked all of Tehran’s hotel rooms for the remainder of 2015 and throughout 2016, and the capital city has already played host to a number of international investment conferences. Peter Westerman of Westerman’s International – who was recently filmed triumphantly riding a Segway at the 2015 Tehran International Industry Exhibition – believes that Iran could be a world power in as little as six months. He says: “Every country in the world is going to want to trade with Iran. There’s opportunities for everyone – whether you work in electronics or energy. “There’s already plans to expand Tehran’s metro, and to electrify the 500 mile Tehran-Mashhad railway. And because Tehran already has an expansive infrastructure system, including a huge four lane motorway, we should have no difficulty in supplying the heavy equipment necessary to make such improvements. “And that’s the thing with Iran – the opportunity and the potential has always been there. The only thing that’s been holding us back have been the sanctions.” Andreas Schweitzer from Arjan Capital even went so far as to describe the lifting of the sanctions as Iran’s “Berlin Wall moment.” “There’s more Iranian projects than international money to invest,” he said. “Iran now has the characteristics of East Germany in 1989.” British Foreign Secretary Philip Hammond said he expects Iran’s sanctions to be lifted by spring 2016. So by this time next year, Iran may already have established itself as a new global superpower.
Mixed-use projects dominate in MEA region According to a new report by Timetric’s Construction Intelligence Center (CIC), 14 of the major economies in the Middle East and Africa (MEA) are currently investing, or planning to invest, over $1.82Tr in commercial and institutional projects. The UAE leads with investment of $687Bn, followed by Saudi Arabia with $436Bn and Kuwait with $158Bn. The mixed-use sector is by far the highest value sector at $1.47Tr, followed by leisure and hospitality at $134.6Bn. Institutional and religious projects, including government buildings and places of worship, which predominantly relates to mosques in the region, are valued at $51.5Bn. Saudi Arabia dominates this sector with 84% of the value, driven by huge numbers of pilgrims to its major religious sites, which also provides investment in the leisure and hospitality market for hotels. The UAE, which includes the major business and tourism destinations of Dubai and Abu Dhabi, dominates the region in terms of the overall value of its project pipeline, and also the mixed-use sector with projects valued at $615Bn. To optimise return on investment, mixed-use includes projects with some elements from the residential, retail, offices, educational or health sectors. There are a number of new cities being developed in the Middle East, which will be largescale mixed-use developments including all these elements and the requisite infrastructure. Neil Martin, Manager at Timetric CIC, comments: “With the increase in population in the Middle East and the improving prosperity of Africa, commercial and institutional buildings will be of increasing importance in providing administrative, retail, commercial and health, as well as educational facilities. The MEA countries’ move from being dependent on hydrocarbons and other commodities will also make investment in the sector of greater significance.”
•4• Fairer trade The lifting of the sanctions will make it considerably easier and more profitable for Iran to trade internationally – whether it’s oil or other products. The World Bank estimates that exports from Iran will eventually increase to approximately $17Bn, about 3.5% of its GDP. The countries most likely to see a large rise in post-sanctions trade with Iran include China, India, Turkey, Saudi Arabia, and the UK. 5