Promise, risk await post-sanction Iran

Sabri Ben-Achour Jul 14, 2015

Promise, risk await post-sanction Iran

Sabri Ben-Achour Jul 14, 2015

Iran today is young.  Sixty-four percent of the population is under 34 years old. 

Iran today is also getting older.  Its “youth bulge,” as demographers refer to the spike in births in the ’80s and early ’90s, is starting to think about “bread and butter issues – jobs, getting married, getting your own apartment,” says Kevan Harris. He’s the Associate Director of Princeton University’s Mossavar-Rahmani Center for Iran and Persian Gulf Studies

“Twenty percent of adults in Iran have some form of higher education, and among Iranians of college age now, 50 percent are going into higher education,” Harris saysHarris says Iran today is also highly educated.   

Ian Bremmer, head of Eurasia Group, says the country and its population are uniquely situated among its regional neighbors. “The country is relatively open, it’s a relatively diverse economy, and that you have a fairly globally-oriented young people in it … means the ability of Iranians to take advantage of sanctions relief is much greater.”

Iran today is also frustrated, observers say.

“After going out of the universities they expect to find good jobs, but it is very difficult to find good jobs, or jobs at all,” says Hossein Bastani with BBC’s Persian Service.  “Many are qualified but cannot find jobs so it leads to frustration.”

These young aspiring Iranians – and their government – are hanging a lot of their hopes on sanctions relief, says Princeton’s Harris.

“This kind of deal represents for them, maybe over optimistically, a big chance for a change,” he says.  “They believe European investment, maybe even American investment, will upgrade the economy.”

For U.S. and European companies, Iran represents a market for imports currently dominated by Asian companies.

“Asia has captured Iran’s market,” explains Ebrahim Mohseni, research associate at the University of Maryland’s Center for International and Security Studies.  “Basically that means China.  But what you need to keep in mind is that opinion polls have also shown that people … don’t like Chinese goods. They’re forced to buy them.”

American and European goods are available, he says, but they are luxury goods, bought through intermediaries at highly marked up prices. iPhones are not unheard of on the streets of Tehran. As sanctions are relieved and Iran’s dismal exchange rate improves, buying power will also increase, says Fariborz Ghadar, senior adviser at the Center for Strategic and International Studies and professor at Penn State.

“The GDP of Iran is twice that of Greece, and the population is seven times of Greece, much younger, much more entrepreneurial, and much more willing to buy stuff,” he says. 

 The associated expectations carry the possibility of disappointment, experts say, since foreign businesses may not trust that the deal will last, or they may not view Iran as a safe place to invest.

“Even before sanctions, a lot of oil and gas companies just kind of threw in the towel because they found it so difficult to operate with the Iranians,” says Keith Crane, senior economist at the RAND Corporation.  

If this occurs, foreign firms may simply view Iran as a market in which to sell goods “for fast, risk free cash,” says University of Maryland’s Mohseni.  “If this happens, there is going to be a rise in unemployment.  A lot of Iranian industry is likely to go bankrupt because they will not be able to compete, which would result in unemployment .”

It’s not simply the spending by foreign investors that is in the air.  Out of the hundred billion dollars in Iranian assets released by the U.S. government under the deal, the government that made the deal has limited discretion on how to spend it, analysts say. 

If that is not spent productively, he says, there is a risk that the government of President Hassan Rouhani will not be able to fulfill its promises of creating employment and development. “It’s not the only decision maker,” Hossein Bastani says.  “There are a lot of government institutions not controlled by the government, that do not report to the administration – I’m talking about state-run institutions under the control of supreme leader Khameini.  There will be competition among such institutions to have a bigger share of the released money.” 

“If young people believe that the speed of change is not sufficient, they will become angry,” Bastani says. 

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