How Oil Sanctions May Have HELPED Iran’s Economy
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Tough sanctions on Iran that hammered its oil exports may have helped the country cope with the commodities slump by forcing it to diversify its economy.
Iran’s economy shrank in 2012 and 2013 after the West tightened sanctions because of its nuclear enrichment program. However, its economy was growing again by 2014, despite oil output falling to around 1 million barrels per day and crude prices collapsing.
At a conference on Thursday, experts in the region attributed Iran’s growth partly to policy efforts that now mean its economy is less dependent on crude exports than its Middle Eastern peers.
“Many of Iran’s neighbors are even more dependent on oil … It is much more diversified than others in the region,” Aasim Husain, deputy director of Middle East and Central Asia at the International Monetary Fund, said at a London conference on Iran hosted by media company Euromoney.
Iran’s economy is seen growing by a healthy 4 percent this year by the World Bank, since the easing of Western sanctions in January. The country has hiked crude production since then and media reports on Wednesday, citing the Iranian oil minister, suggested policymakers were aiming to reach four million barrels per day by March 2017.
“I think ultimately Iran does not need to export crude or raw materials — we should export petrochemicals or other added-value materials,” Amir Mehran, head of foreign assets and investment management at Iran’s Bank Pasargad, said on Thursday.
Husain said higher oil output would boost the economy for the next 12-15 months, but that increasing production substantially would require better infrastructure and access to finance.
“Iran needs to reconnect with the international financial world,” he said.
Iran has attracted great interest from investors since sanctions were lifted and has the second-largest economy in the region after Saudi Arabia and the second-largest population after Egypt. Its competitive advantages include cheap labor; a young, highly-educated population and inexpensive and reliable energy sources.
However, investors are largely sitting on the sidelines, nervous on the mishmash of remaining sanctions and whether its rapprochement with the West will hold.
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