Teheran: Airbus plan heralds Iran boom after sanctions lifted
KONFRONTASI-A purchase of more than 100 aircraft from Europe's Airbus may be one of Iran's first big deals in a trade and investment boom that could reshape the economy of the Middle East.
"The legs of Iran’s economy are now free of the chains of sanctions, and it’s time to build and grow,” President Hassan Rouhani tweeted on Sunday, a day after world powers lifted sanctions on Tehran in exchange for curbs on its nuclear program.
Hours earlier, his transport minister Abbas Akhoondi told the Tasnim news agency that Iran intended to buy 114 civil aircraft from Airbus (AIR.PA) - a deal that could be worth more than $10 billion at catalog prices.
Airbus said on Saturday it had not yet held commercial talks with Iran, and businesses operating in the Islamic republic will continue to face big obstacles for the foreseeable future.
Risks include indebted Iranian banks, a primitive legal system, corruption and an inflexible labor market. Many foreign companies will remain wary of investing in Iran because of concern that the sanctions could "snap back" if Tehran is later found not to be complying with the nuclear agreement.
But the Airbus plan underlined Iran's potential: with about 80 million people and annual output of some $400 billion, it is the biggest economy to rejoin the global trading system since the Soviet Union broke up over two decades ago.
The nuclear deal removed restrictions that stifled Iran's economy for most of this decade - on banking, money transfers, insurance, trade, transport and procurement of technology.
This will allow Iran to satisfy pent-up demand for goods and services that it had trouble obtaining at affordable prices under sanctions, from aircraft to factory machinery, medicines and some consumer goods such as cosmetics and branded clothing.
Iran will immediately have more money to pay for imports, as the government gains access to tens of billions of dollars of its assets that were frozen abroad by the sanctions.
U.S. officials have estimated the amount of funds to be unblocked at over $100 billion. Iran's central bank has said the total is much smaller at $29 billion, but that would by itself still cover several months of imports of goods and services.
Iran will also gain financial strength from an increase in oil exports, as it becomes able to sell freely into the global market once again - though ultra-low oil prices, and the need to repair ageing oil facilities, mean the rise in revenues may initially be small.
Rouhani told parliament on Sunday that Iran aimed to attract $30-50 billion of foreign capital in the next five years to boost annual economic growth, now near zero, to 8 percent - a level achieved by Asia's "dragon" economies in their best years.
"Iranian government policies in the post-sanctions era will focus on attracting foreign investment, expanding non-oil exports, and making the best use of financial assets,” he said.