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Marketplace Morning Report

Less than zero

Sep 17, 2019

Iran has big economic potential … eventually

Mitchell Hartman Apr 6, 2015
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President Obama is now trying to sell the framework agreement to monitor and limit Iran’s nuclear program to the American people, to skeptical members of Congress and to very skeptical allies, such as Israel and Saudi Arabia. 

A final deal will still be difficult to conclude and could be scuttled by opponents in Congress or Tehran, but if Iran does eventually emerge from decades of economic sanctions (originally dating to the Iranian Revolution in 1979, and significantly expanded by the U.N. in 2006), it could become a regional economic powerhouse.

According to sources including the CIA World Factbook, the World Bank and the United Nations, Iran has: 

  • The largest natural gas reserves in the world.
  • The third-largest proven oil reserves in the world.
  • Among the most zinc in the world, plus copper, iron, lead and coal.
  • Well-developed industry compared to its Middle East neighbors, including auto and cement plants, food production and telecom.
  • More than 75 million consumers, many of them middle class and attuned to Western products and styles. 

“If sanctions are removed, then you could see a country that becomes quite dynamic and would be seen as the next big emerging market,” says Daniel Yergin, energy expert at IHS and author of “The Quest: Energy, Security, and the Remaking of the Modern World.” 

Iran also has  a skilled, well-educated, highly literate population, says Kaveh Ehsani at DePaul University.

“The human resources are tremendous, the higher-education system is very good and Iranian students are highly motivated,” Ehsani says.  

But there are significant obstacles to Iran becoming a significant player in global markets, Eshani and others point out. The biggest potential global entry for Iran would be in natural gas. By sheer reserves, Iran could knock out Russia as the major supplier to Europe. But sanctions have left Iran’s infrastructure outdated and in ill-repair, says former oil trader Stephen Schork, editor of the Schork Report.

The country also lacks adequate pipelines or liquid natural-gas plants to get its gas to market. And it would have to significantly improve relations with neighbors to add new pipeline capacity across their territories. 

“I am skeptical that Iran can compete with Russia or Qatar or Australia or the United States,” says Schork.

Other analysts say that decades of sanctions and economic isolation combined with Iran’s centralized theocratic government, have suffocated the private sector and innovation, and bred corruption among a powerful conservative political elite that may not want its wings clipped by economic reformers now.

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