As Iranian Sanctions Lift, Global Economic Benefits will have Attached Risks

The Islamic Republic of Iran boasts the world’s fourth-largest oil reserves, second-largest gas supplies, and the 29th-biggest economy, estimated from US$415.3 billion in 2014. Its gross domestic product is growing about 3% annually despite the crippling impact associated with decades-old sanctions.

Not surprisingly, then, possible economic gains are prevailing over military, terrorism and human rights concerns in framing responses to the historic deal agreed to this week between Iran and 6 major world powers (P5+1).

While Iran paths Saudi Arabia as the biggest economy in the region thanks to the latter’s power dominance, it has many advantages over its rival that are certain to become more pronounced as supports are lifted. Iran’s economy is more diversified and it includes a robust manufacturing sector which supplies domestic and Asian markets with chemicals, plastic materials, automobiles, and household consumer electronics.

Iran is also set to get a boost from about $100 billion within assets currently frozen by US and UN sanctions once the International Atomic Power Agency (IAEA) certifies that Tehran is actually fulfilling its part of the offer, probably by the end of the year.

As supports fall away, Iran should rise swiftly back into the major teams, propelled by larger power exports that could top $100 billion annually, the release of hitherto freezing funds and a highly educated and motivated workforce.

Iran, for its part, has been stressing the economical and stability benefits of the arrangement. President Hassan Rouhani emphasized to their nation: “We are on the brink of a brand new era in the international community.”

Ever the cautious international bureaucrat, IAEA overseer general Yukiya Amano simply endorsed the Vienna accord as a “significant step forward.” Then, the IAEA has no financial stake in the plan’s failure or success.

Most nations, however, do, and they are counting on Iran becoming a major market for their goods and services, signaling why money is trumping other concerns when it comes to responses to the accord. In addition, for people who remain opposed, their rivalry with Iran meant they did not expect to gain anything in the first place.

Here is really a look at how 20 nations with a variety of ties to Iran reacted to news from the accord, and how economic pursuits were the dominant element.

Russia and China await large benefits

Russia is one superpower whose stance is as clear as that of many developing countries. President Vladimir Putin has declared that relations with Iran “will get a new impetus and will no longer be influenced by external factors.”

Foremost in fiscal terms will be high-tech weaponry sales and atomic reactors for civilian energy generation. Spain expects to benefit despite knowing a flood of Iranian gas and oil on the market will lower power prices, hurting its own main source of income.

China is another superpower that warmly welcomed the deal as a “historical day.” China, like Spain, plans to sell civilian atomic plants to Iran and is within talks to invest in gas, oil and rare earth mineral mines in Iran. Beijing, which imports a lot more than 500,000 barrels of Iranian crude a day despite the supports, also hopes to have fewer problems fueling its economy.

US, Canada, Australia, and UK reactions more mixed

In the US as well as Canada – which have little requirement for Iranian oil or other exports but whose companies hope to strike profitable deals selling technology, power infrastructure and consumer items – the political reaction offers understandably been more mixed.

Reflecting the divisions within the US about Iran’s potential martial risk, Republican presidential hopefuls such as Jeb Bush denounced the arrangement as “dangerous, deeply flawed, and shortsighted.”

Democratic candidate Hillary Clinton, however, is actually less fearful of this threat and more focused on pitching financial welfare to American voters. The lady described it as “an important step” — one which she helped set the actual groundwork for as secretary of state.

Canada, which severed diplomatic relations in 2012 over Iran’s atomic and human rights infractions, said it needed to examine the deal further before taking any specific motion, even as pressure mounts to embrace the fiscal advantages of reestablishing ties.

Australia greeted the deal by stressing “caution at least as much as the welcome,” but its exports, mostly grains, to Iran are small at $222 million.

The UK, which also participated in the negotiations, has increased its trade over the past 12 months by 36% to $109 million. Birmingham hopes to gradually restore relaxed to a relationship that broke off in 2011.

Israel, the GCC, and the Sunni–Shiite struggle

Israel lives under the verbal threat associated with annihilation by Tehran and naturally doesn’t expect to have any commercial transactions directly or indirectly using the Ayatollah’s regime.

Freed from economic considerations, Prime Minister Netanyahu called the deal “a bad mistake of historical proportions.”

Certainly, seen from Jerusalem, the anti-Semitic leaders of the Islamic Republic could set up vast portions of their newly found funds to strike terror via Hezbollah and Hamas. Consequently, antipathy as well as fear of Iran had brought Israel nearer to erstwhile Arab foes in opposition Iran.

Saudi Arabia, for example, which is kept in a sectarian struggle against Iran for dominance in Iraq, Syria, Yemen, and also the Gulf, had its diplomats speak confidentially about “extremely dangerous” Local expansionism in the wake of the nuclear deal.

Fellow Gulf Cooperation Council (GCC) members Kuwait, Bahrain, and Qatar part of this Sunni–Shiite battle, were much more nuanced in their response.

All three Gulf monarchies know that the deal provides both economic advantages and costs. Iranian cash soon to be heading their way will boost real estate, luxury goods, and consulting services. At the same time, higher Iranian oil and gas exports will eat into their established energy-based income streams. Iran’s oil minister is already likely to boost exports by 500,Thousand barrels per day within 6 months and top out at 2.5 million casks per day within a couple of years. This will be a particularly major blow towards the Saudis, whose crude oil will become much less vital to the global energy marketplace.

Two other GCC member states, the actual United Arab Emirates (UAE) and Oman, are taking a more positive approach, regarding Iran’s economic and strategic reemergence as inevitable. The UAE, which has been rebuilding non-energy trade with Iran that’s now really worth $17 billion, extended “congratulations” coupled with hope that the agreement will contribute to “strengthening regional security as well as stability.”

Oman, which helped sow the seeds of this agreement by opening up communication channels between Iran and the US, proceeded to go even further, hailing the agreement like a “historic win–win.”

Oman has historical commercial ties with Iran and a confessionally mixed population of Ibadi, Sunni, and Shiite Muslims. Therefore, it cannot afford to foment intrafaith tensions that would rip apart it’s society and doom its emerging status as a diplomatic as well as mercantile hub.

Iran’s allies praise deal

Iraq’s Shiite government is allied with Iran confessionally and dependent upon it both commercially and in the battle against the Islamic State. Accordingly, Iraq sees the deal as a “driver for regional stability.”

Indeed, long afterwards the US is gone from its dirt, Iraq’s Shiite majority knows that sustaining not just political but financial clout over its restive Sunni populace north of Baghdad will depend on Tehran’utes largess via militias and cross-border trade.

Then there is dysfunctional Syria, where the tottering regime is really a client beholden fiscally, commercially and militarily to Tehran.

Having just accepted the $1 billion line of credit from Iran, Bashar al-Assad could not do anything but praise the actual agreement as “a great victory" and “a fundamental turning point.” Presumably, Assad expectations that if he can just hold on to Damascus a little longer, Iran will be more energized in convincing the US and EU that the Alawite ruling class can still secure Syria against the Islamic State.

Neighbors see gains from trade, oil flows

Istanbul, despite being a regional rival of Tehran on the politics stage, declared “the nuclear deal is great news for that Turkish economy,” would lead to expense and help reduce the price of oil.

Indeed, Turkey’s economy, presently Iran’utes third-largest trading partner, will benefit each from larger flows of cheap Iranian gas and oil to its own consumers and from tariffs on energy that passes through it’s borders to European countries.

Likewise, the entire Turkish supply chain – from corporations to the people – stands to reap windfalls from goods flowing through it’s borders to Europe as well as beyond.

Pakistan and India, similarly, hardly feel threatened by Iran even despite Tehran’s influence on Afghanistan, due to their own nuclear capabilities. Thus, each welcomed the deal and it is economic impacts.

Pakistan expects “financial growth along with an increase in trade" especially through the Iran-Pakistan pipeline. Iranian gasoline, smuggled over the border of Baluchistan and Makran provinces, has long kept the actual Pakistani economy afloat. However, those supply lines provide no tax revenues. Now, as energy imports can take place freely as well as overtly, the central federal government in Islamabad stands to benefit.

India also expressed delight at additional “energy cooperation and connectivity” along with a reaffirmation of each country’s “right to peaceful uses of nuclear energy.” India has an ever-rising demand for fuel, and Iran is positioned a short distance away to generate a steady supply.

Kazakhstan’s authorities hailed the accord as they expect swift gains from the recently inaugurated trans-national railway. The Central Asian nation also intends to work with Iran toward enhanced co-operation in the energy-rich Caspian Sea.

Jockeying for position

China is currently Iran’s largest trading companion, with non-fuel trade expected to increase from $13 billion in 2014 in order to at least $80 billion by the end of this year. Rounding out the top five are the UAE, Poultry, the European Union and South Korea. Seoul also quickly joined Iran’s other top trading partners in inviting the nuclear deal.

As no more sanctions bolsters Iran’s economy, these 20, and many other countries will be competing over the coming months and years to enjoy the benefits that will accompany the nuclear accord taking effect.

Clearly, it is no surprise that money is dominating reactions, rather than ideals or even fear. For better or worse, global as well as regional responses are being shaped by fiscal calculations. Even security and strategic pursuits are being seen in commercial instead of military terms.

It’s the economy, stupid.

Money trumps fear in reactions to West’utes nuclear accord with Iran is republished with permission from The Conversation