The historic nuclear deal between Iran and the P5+1 member countries signed in July 2015 has finally been implemented with sanctions against Iran lifted on January 17. The lifting of sanctions has been hailed by Iran, and the international community. However, some sanctions continue to remain against Iranian organisations that are alleged to be involved in funding terror groups. Declaring that Iran is now reopening its doors to the world economy, Iran’s President Hassan Rouhani has described the lifting of sanctions against Iran as “historic” and a “great victory.” US President Barack Obama said, “This is a good day because once again we are seeing what’s possible through strong American diplomacy.”
Implications for Iran
With the sanctions lifted against Iran, it can now trade freely in the international markets and try and make up for the lost years, due to its international isolation. The lifting of energy sanctions could help Iran increase its revenue from oil exports by an estimated $10bn by next year, according to a few reports. According to Iran’s central bank, the lifting of banking sanctions will allow $30bn of foreign reserves currently frozen in accounts around the world to be brought back. The US Treasury has estimated $50bn of foreign reserves will be brought back to Iran.
As the sanctions against Iran are lifted, it could boost its GDP growth to around 5 percent in 2016-17, the International Monetary Fund (IMF) said. Due to the sanctions, Iran’s economy had taken a massive hit growing at zero percent, followed by high inflation and massive unemployment.
According to Iran’s first Vice-President Eshaq Jahangiri, sanctions have added 15 percent to the cost of trading with Iran. The lifting of sanctions will save the country some $15bn yearly in cheaper trade, Mr Jahangiri said.
Impact on world markets
Iran will now also be able to export crude oil to the world as much as it wants to. With Iran returning to the global crude oil market, it could lead to a price war with its rival Saudi Arabia. Saudi Arabia has a bulk of the market share at present and Iran’s re-entry will only erode its market share.
Impact on India
The lifting of sanctions on Iran would bolster India’s trade relations with Iran. India can now import freely from Iran as well as export to Iran. The removal of restrictions on payment to Iranian companies has now been lifted. India was compelled to cut down its oil imports from Iran due to the US-EU sanctions against Tehran. With sanctions now being lifted, one can expect a major upsurge in India-Iran economic and energy relations. Iran has identified India as its major economic partner, and is expecting Indian investments to go up dramatically. India is looking to fast-track the construction of the Chabahar port in Iran and an array of related infrastructure projects. The Chabahar port would give India access to Afghanistan and is strategically important. The port would give India sea-to-land access to Afghanistan and also act as a gateway to Central Asia for India to secure its interests.
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