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| FILE - In this Thursday, Jan. 26, 2012, file photo, Iranians walk in a corridor of the main old Bazaar of Tehran, Iran. The Iranian economy has been battered since 2011, when the U.S. and Europe broadened economic sanctions against Iran to include crucial oil and banking sectors. But the sanctions relief offered to Iran by the U.S. and five world powers in November 2013, has already begun to boost morale in the business community |
DUBAI, United
Arab Emirates (AP) -- The sanctions relief offered to Iran by the
U.S. and five world powers has begun to get the gears of commerce slowly
turning again in an economy that remains in shambles.
The
Obama administration estimates relief from some sanctions in exchange
for a temporary pause in Iran's nuclear enrichment program will amount
to just $7 billion. That's a meager amount for the economy of a nation
of nearly 80 million people - it's less than one month's worth of Iran's
oil production and just 7 percent of Iran's overseas cash that remains
frozen under the sanctions.
Still, Iranians
see the move as a much needed step toward a more normal economy after
years of crippling inflation and job losses.
"Markets
operate on a psychological basis," says Ray Takeyh, an Iran expert at
the Council on Foreign Relations and former U.S. State Department senior
adviser. "The psychology of Iranian commerce has changed."
Rahmat
Dehghani, a glazier, says he has been invited to discuss a new hotel
project in the northeastern city of Mashhad, 550 miles (900 kilometers)
east of the capital, Tehran.
"For months, the owner had delayed any discussion about his project since the future was not clear for any investment," he said.
The
Iranian economy was already struggling under the weight of corruption,
mismanagement and costly food, energy and cash subsides for the poor
when the U.S. and Europe broadened economic sanctions against Iran to
include its crucial oil and banking sectors in late 2011.
Oil
sales plummeted by about 1.5 million barrels per day, depriving Iran of
about $80 billion since early 2012, according to the White House. At
the same time, much of the revenue Iran did earn from exports to a few
Asian countries that were allowed to buy Iranian oil remained out of the
country. The sanctions required oil buyers to pay into locked bank
accounts that Iran can access only to purchase non-sanctioned goods or
humanitarian supplies.
Manufacturers found it
increasingly difficult to buy crucial components to make products or
keep factories running. Inflation and unemployment soared and Iran's
national currency, the rial, lost more than half its value.
"People
can't save, they can't invest, it's hard to buy a home, no one can
trust the currency, no one knows what they really earn," says Anthony
Cordesman, a Middle East and energy expert at the Center for Strategic
and International Studies.
At the same time,
Iran is believed to have provided the regime of Syrian President Bashar
Assad with billions of dollars in economic aid and fuel over the past
three years as Syria's civil war erupted.
Public
grumbling grew. Prices for staples such as chicken and lamb climbed out
of reach of many low-income Iranians. Late last year, Iranian riot
police were deployed at key intersections in Tehran after sporadic
protests flared.
That frustration led to the
election of President Hassan Rouhani, who campaigned on economic
reforms. Iranians blamed former President Mahmoud Ahmadinejad for
mismanagement and corruption that many believe was at least as damaging
to the economy as the West's sanctions.
The
bleak conditions may have also forced Rouhani - backed by Iran's supreme
leader Ayatollah Ali Khamenei - to back the nuclear deal struck Sunday
in Geneva between Iran and the U.S., Russia, China, France, the U.K. and
Germany.
Rouhani, in an address delivered
this week on the occasion of his first 100 days in office, said the
Iranian economy contracted 6 percent in the last year. That compares
with a 4.7 percent decline in the U.S. economy during the Great
Recession, which lasted from December 2007 to June 2009.Rouhani pledged
to halt the recession by March of next year and reduce inflation to an
annual rate of 25 percent by the end of next year.
The
White House says the nuclear deal keeps in place "the overwhelming
majority of the sanctions regime." Almost all of Iran's approximately
$100 billion in foreign exchange holdings remains inaccessible or
restricted by sanctions.
That means for the
vast majority of Iranians, the deal will do little to alleviate the cost
of daily life. Inflation hovers around 35 percent, pushing the price of
goods ever higher. Officially, unemployment is around 13 percent,
though that number is widely thought by experts to be much higher.
"Iran will continue to bleed financially," said risk consultancy Eurasia Group in a report.
But
sanctions will be suspended on gold and precious metals, Iran's auto
sector and petrochemical exports. Restrictions on oil exports will get
no tighter, as they were slated to, and restrictions on insurance were
loosened, which will help make it easier for Iran to sell the oil it
can. The agreement also gives Iran's aviation industry a boost by
allowing airlines to buy needed parts.
And,
importantly, the deal began to restore some confidence in the Iranian
economy after an extraordinarily dark period. The public reaction to the
deal was largely positive, and the rial immediately gained about 3
percent against the dollar, according to money exchangers in Tehran.
Amin
Naderi, who imports sportswear, has been shrinking his business for
months in fear that the economy would continue to slide and fewer people
would buy his product. Now, he says, the situation is looking brighter.
When
- and whether - a brighter outlook will turn into real gains for
Iranians, though, remains to be seen. Reza Ghazinouri, a former Iranian
student activist now at the Washington-based human rights group United
For Iran, says Iranians seem overwhelmingly happy with the deal and what
it could mean for the economy.
But with sanctions relief so limited, he
worries hopes are too high.
"A very very
small percentage of people are unhappy with this," he says. "The rest of
the people are really happy. But they are hoping too much."
