Overview: Iran Analysis Weekly Report Jan 17, 2016
17 Jan, 2016
Vistar Business Monitor
A triumph for diplomacy; a failure for warmongering.
The UN atomic agency announced Saturday that Iran has met all of its obligations under a landmark nuclear deal with six world powers. An agreement reached by Iran and the P5+1 nations in July of last year calls on Iran to implement certain measures that will set back its ability to produce enough material for nuclear weapons. In exchange for these setbacks, international sanctions directed at Iran’s nuclear program will begin to be lifted.
Today's announcement confirmed that Iran has disabled two-thirds of its centrifuges, shipped out most of its stockpile of low-enriched uranium, and poured concrete into its plutonium reactor in addition to granted access to the IAEA to put in verification and monitoring provisions at important nuclear facilities.
The takeaway from this week is clear: diplomacy works. Just this morning, Iran released five American prisoners, including journalist Jason Rezaian and in return, the U.S. will either pardon or drop charges against seven Iranians, six of whom are dual citizens, accused or convicted of violating US sanctions.
The very quick and non-confrontational resolution of the arrest of 10 US sailors last week, who had entered Iranian waters in the Persian Gulf, has provided cause for further encouragement. It indicated that President Hassan Rouhani has developed a working relationship with the Revolutionary Guards in Iran. This suggests to us that Rouhani’s administration is able to successfully contain the domestic hardline elements, and is fully focused on implementing the JCPOA without any further irritations.
Though Iran business won’t be completely sanctions-free, the actual implementation of the JCPOA will make a wide range of trade and investment activities feasible, especially from an EU perspective. At the same time, despite the lifting of sanctions, some EU entities such as major banks may be slow in restarting Iran business due to over-compliance. This will compel interested companies to develop appropriate strategies for their future Iran activities.
With sanctions out of the way, Iranian officials will regain access to billions of dollars in frozen assets and global capital markets, fueling the economic recovery promised by President Hassan Rouhani just in time for March elections. At the same time, the nation’s oil minister, Bijan Zanganeh, promises to raise Iranian oil production and exports by roughly half a million barrels a day as soon as sanctions ease. Such a return to the global market will surely weigh on petroleum futures through the first quarter, likely slowing domestic crude oil exports, and working against struggling producers.
On the elections front Supreme Leader Ayatollah Ali Khamenei called for massive voter turnout during a speech marking the 1978 anti-Shah protests on January 9 in Qom.
On the economic front Mohammad Baqer Nobakht has said that due to certain reasons that will be announced later, we refused to submit the budget bill to the parliament last week. But the bill and its indices are already prepared for submission and it will most probably be sent to the parliament after the Joint Comprehensive Plan of Action is implemented.
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