Iran’s new approach to building energy allies is being revealed as the former powerhouse staggers back onto the global stage. The lifting of sanctions in January has given the country a new lease of life. Tehran’s ability to adapt will prove vital, as today’s market is more competitive than the one it reluctantly stepped back from more than a decade ago.
Tehran remains confident that it can continue to build on its current 3.7m barrels a day (b/d) of oil production, which already represents a rise of half a million b/d since February. This means the country is already close to its target of 4m b/d and Tehran has said it aims to export 2.2m b/d by the end of the summer. The country’s strategy to regain superiority has started well, although some of this spike in volume may be a case of Iran emptying its full storage capacity. Read more
The sultanate of Oman appears set to play a key role in Iran’s efforts to reintegrate into the regional and global economy. While other Middle Eastern states kept their distance during Iran’s years of isolation, Oman stuck with its longtime trading partner and is now set to reap the benefits, as the two countries move ahead with large-scale joint economic initiatives.
A long-planned $60bn undersea gas pipeline project has been given fresh impetus since sanctions on Iran were lifted earlier this year. The Korea Gas Corporation, a partly state-owned South Korean energy company, is reported to be nearing an agreement to build pipelines that will pump 20m cubic metres of Iranian gas a day to Oman, where it will be converted into Liquefied Natural Gas for international export. Read more
US penalties handed down on ZTE, the Chinese telecoms giant, are a reminder that despite January’s partial lifting of sanctions on Iran after UN nuclear inspections, they can still bite.
Previously, the Bank of Kunlun, set up to handle oil for loans and infrastructure deals between Beijing and Tehran during the embargo, had been cited for violations. Chinese commercial and policy banks nonetheless were gearing up last year for legal business, supported by a flurry of official initiatives.
China’s “One-Belt One-Road” outward investment campaign envisions a tenfold increase in Sino-Iranian economic engagement over the next decade to $500bn; Iran took a tiny 2 per cent founding share in the Asian Infrastructure Investment Bank; and the countries discussed bilateral currency swap lines. Read more
Iran’s historic nuclear deal and the lifting of sanctions should bring the country back into the global community. For investors, it is being heralded as the return of the largest economy to the global system since the breakup of the USSR in 1991.
We recently went on a fact-finding mission to Iran prior to the lifting of sanctions. What we found was a real eye-opener and exposed many of our biases as wrong. Read more
President Hassan Rouhani’s attempts to reform the oil sector in Iran are essential for the Iranian economy but are facing steadfast opposition.
On January 30, hardline students gathered outside the oil ministry in Tehran to protest against a proposed new legal framework for the industry. At the end of November, Rouhani’s government had proposed extensive changes to the regulation of oil production, seeking to make investment in Iran more attractive to international companies. Read more
Iran’s Shah Mosque – a masterpiece of Persian and Islamic architecture – is renowned for the shimmer of its tilework. There is also, undoubtedly, a brilliant shine to the prospect of Iran being reconnected to the world economy and of becoming the next major emerging market. As an investment destination, Iran’s potential is plain for all to see: a population of 80m people with 60 per cent under the age of 30, the world’s third largest oil and gas reserves, a wealth of other mineral resources, and an economy almost 20 per cent larger than that of South Africa. Iran’s economy is also relatively diversified, making the country’s $100bn stock market an attractive prospect for investors.
Having reached Implementation Day on January 16, the pressing question now is whether Iran can live up to its potential and overcome a range of underlying structural challenges. The litany of existing problems is extensive: weak corporate governance, a cumbersome and inefficient bureaucracy, high levels of political interference and a lack of investor protections. Read more
By Ali Safavi, National Council of Resistance of Iran
The heinous terrorist attacks in San Bernardino last week and in Paris last month were clear reminders of the growing threat of Islamic extremism. This vicious ideology continues to take new physical forms – once al-Qaeda, now ISIS. Their goal is to create an Islamic “state” capable of enforcing Sharia law by force and unwinding humanity’s democratic achievements.
While the Sunni variant of fundamentalism desperately seeks to achieve this objective, the Shiite version in Tehran is well on its way. It should be confronted, not engaged.
Hotspots like Syria, Iraq, and Yemen have become a breeding ground for ISIS. In all of them, Tehran’s fundamentalist regime plays a key role in the mayhem. Read more
A great deal has been written about the opportunities waiting for both strategic and portfolio investors in post-sanctions Iran. There is no denying that the country of almost 80m people, holder of the world’s third largest reserves of oil and its second largest reserves of mostly untapped gas, has enormous potential. GDP is expected to be $430bn for the current fiscal year (to March 2016) and is certainly capable of more than doubling over the next seven years if sanctions are taken down as per the agreement with the UN, and they stay down.
But Iran is still a state dominated by religious leaders and institutions and this means there are fundamental differences between the way business and investment is carried out compared with practices in OECD countries. The economy is also heavily dominated by entrenched insiders, many of whom have very close political connections, if they are not actually part of the state structure. Of course investors in any developing economy need to be mindful of local conditions and be ready to adapt. This is much more so in Iran; the patient and the prepared will make a great deal of money, while those who rush in with ill-prepared due diligence will quickly falter. Read more
With its 34tn cubic metres of natural gas, enough to satisfy current EU natural gas demand for 90 years, Iran has the biggest gas reserves in the world. Despite this rich natural endowment, the country has not yet translated potential into reality. Paradoxically, its natural gas production continues to be barely sufficient to satisfy its own domestic consumption.
There are two reasons for the under-exploitation of Iran’s natural gas resources: the international sanctions regime (which has targeted the country’s energy sector since 2007, completely halting the activities of international energy companies) and the country’s legal petroleum framework (the so-called ‘buyback scheme’, encumbered by very unattractive terms for international energy companies). Read more
By Alireza Jafarzadeh, National Council of Resistance of Iran
August 14th marks exactly 13 years since the day I walked into a conference room at the Willard Intercontinental Hotel in Washington, DC to reveal the existence of Natanz and Arak nuclear sites in Iran for the first time. The revelation triggered an international response that has continued to this day.
The international community owes a huge debt of gratitude to the main Iran opposition movement, the Mujahedin-e Khalq (MEK), for its diligent and continuing efforts to unmask Tehran’s clandestine nuclear weapons program. Without it, the mullahs would have had the bomb by now. Read more
Everybody seems to be greedily eyeing potential business deals with Iran after the nuclear deal reached with six world powers. This is no surprise. Iran’s economy is larger than Australia’s and twice as large as Iran’s successful neighbour, the UAE. More importantly, Iran is set to grow even faster. In fact, even under the most conservative projections (before the deal was signed), Iran was set to contribute nearly as much as Italy to global growth in the next decade: some $270bn. Beyond its large and starved domestic market after so many years of sanctions, Iran’s oil and gas reserves are the jewels in the crown. Read more
By Christopher de Bellaigue, Trusted Sources
The prospects for an Iranian economic revival and new opportunities for foreign investors hinge on a final agreement at the end of this month on the nuclear deal and United Nations verification – probably at the start of 2016 – of Iranian compliance, after which sanctions will begin to be lifted.
But even before being finalised, the nuclear deal is already proving economically beneficial since the prospect of the deal is facilitating the Iranian government’s efforts at fiscal adjustment essential for longer-term macroeconomic stability.
Political risk is well contained and will be further reduced by the most tangible dividends of the lifting of sanctions: Iran’s gaining access to $100-120bn in frozen assets (as soon as sanctions are lifted) and its readmission to the SWIFT mechanism of electronic money transfers. Read more
The least acknowledged economic race is gearing up for the starting line. Politics aside, the potential Iranian nuclear deal with the five permanent members of the United Nations Security Council plus Germany (P5+1) has led to multinational businesses focusing on the opportunities presented by a reconciliation with the Islamic Republic.
The magnetism of Iran as a destination for foreign investment is rooted in its large well educated workforce, richness in natural resources as well as, of course, its geopolitical importance.
In spite of sanctions, Iran has an established banking sector; infrastructural foundations in the transport, aviation and energy industries; a sophisticated consumer market that is conscious of international brands and products; a large number of port facilities and more than 20 free trade and special economic zones that are well placed to serve international companies. Read more
Tedpix index, 2 years. Source: Tehran Stock Exchange
Iranian investors’ concerns over the future of nuclear negotiations with the world powers, added to falling oil prices, have caused further falls in shares prices on the Tehran Stock Exchange.
The bourse’s main index, the Tedpix, closed at 66,902 on Wednesday – the last working day this week – about 11 per cent down from its 75,949 points on November 24, when investors expected the nuclear negotiators to yield results, particularly an easing of international sanctions over Tehran’s nuclear programme. Read more
By Faisal Ghori, author
The best performing stock market in the world in 2013 was up 130 per cent last year*. The country it serves has a population of nearly 80m, some 40 per cent of whom are under the age of 24. It has one of the world’s highest literacy rates and is also home to the world’s fourth largest proven crude oil reserves. Which market is this? The Tehran Stock Exchange (TSE), of course.
For frontier market investors, Iran remains the Holy Grail. Charles Robertson, Global Chief Economist at Renaissance Capital, believes that following the opening of the Saudi Arabian market, “Iran is the world’s last major market to open up” and could potentially be accessible in the next 6-18 months. Read more
Last week this blog looked at the investment case for Iraq under the headline: “A frontier too far?” So we were struck by a new report today on neighbouring Iran with the opening line: “Iran is beyond the final frontier for portfolio investors.”
One can quibble about which frontier is further but in truth investment in Iran is not so outlandish. The nuclear deal struck between Iran and several world powers in November prompted a renewed look at the investment case for Iran, as has been the case for other markets that have come in from the cold after international isolation, most recently Burma. But in fact, even in isolation, Iran’s capital markets have grown just fine. Read more
Many Iranians have expressed disappointment that their national currency, the rial, did not strengthen over the weekend in response to the historic phone call between Iran’s president Hassan Rouhani and Barack Obama.
The reason the currency market did not reflect the public mood, analysts believe, is because the central bank is determined to curb a currency crisis and shield the market against political news in order to encourage investment, domestic production and non-oil exports. Read more
Iranian shoppers are getting used to constantly rising prices, especially – and most worryingly – prices of basic commodities. Inflation over the past year has added to feelings of insecurity. Butter, for example, is increasingly scarce in Tehran and, where available, its price has doubled in the past few weeks, from 11,000 rials ($0.44) for 100 grammes to 22,000 rials. Read more
It’s difficult not to feel sympathy for the management of Tupras, Turkey’s sole oil refiner.
For the past two years the company has been walking the tightrope between the Turkish and US government positions on its crude imports from Iran, which at their peak of 9.25 million tonnes in 2011 accounted for more than half of the crude it processed. Read more
Dubai’s trade statistics for 2012 are in. And they show that, finally, western sanctions on Iran are crippling trade with the Islamic republic. Read more