The Economic Significance of the Nuclear Deal for Iran

Bijan Khajehpour

Experts agree that the signing of a comprehensive nuclear agreement and the consequent lifting of external sanctions will have a positive impact on the Iranian economy. However, the pace of sanctions relief as well as actual policies of the Iranian government will produce different results for the economic development in the country. This presentation looks at two distinct scenarios, i.e.: Scenario 1 being the signing of a comprehensive nuclear deal which would lead to the lifting of sanctions within two years; and Scenario 2 being the failure of the deal, but a consequent de-escalation between Iran and the EU while many U.S. sanctions would remain in place. The potential economic impact of each of these scenarios is assessed through projecting a number of economic indicators. 

While Iranian and Western stakeholders have different expectations on how quickly the sanctions would be lifted, the psychological boost generated by a comprehensive deal will be enough to create a significant economic momentum. The practical limitations created by sanctions will be among other existing shortcomings in doing business in Iran. Fact is that Iran will be in a better position to materialize its economic potential.

Even without a comprehensive deal, the Iranian economy will grow, though at a slower pace. Some experts believe that only 20 percent of the country’s economic problems are related to sanctions and that other issues such as better management, improved infrastructure, increased energy efficiency and modern banking solutions would help Iran resolve some of its economic bottlenecks, even without a comprehensive agreement. However, a nuclear deal will accelerate the economic development in the country.