Cyril Julien, AFP
Last updated: 3 October, 2013

Iran eyes economic revival after historic Obama call

Iranians hope international sanctions that have suffocated the economy could be lifted if relations improve between Tehran and Washington after President Hassan Rouhani’s historic phone chat with Barack Obama.

Iran and the United States, which have had no diplomatic relations since 1980, “should have done it earlier”, said Morteza, a taxi driver who did not want to be fully identified.

“Because everyone is affected by the sanctions and the economic situation,” he said, complaining that he could not find quality spare parts for his car because of sanctions.

Iran, subject to UN sanctions over its controversial nuclear programme, is also struggling with harsh measures imposed by the United States and the European Union targeting its vital oil income and access to the global banking system.

Economy Minister Ali Tayyebnia warned in August that the official figure of 3.5 million unemployed, or 11.2 percent of the workforce, could rise to 8.5 million with a wave of young people on the verge of entering the job market.

While inflation has dropped slightly, it currently stands at 39 percent.

Consumer prices have nearly doubled in a year, making common commodities such as staples rice, cooking oil and chicken too expensive for many people, according to the official statistics organisation.

Iran’s currency, the rial, has been grossly devalued since late 2011.

But since Rouhani’s charm offensive targeting the international community, the rial has started to stabilise. Today, some 30,000 rials buy one US dollar, compared with a rate of 38,000 to one just a few months ago.

Officials have warned that detente with the world, and the eventual lifting of sanctions, would be a drawn-out process.

But for Iranians, last Friday’s phone conversation between Rouhani and the American president — the first such contact since the 1979 Islamic revolution — is a real sign of hope.

Mehdi Miremadi, head of the Franco-Iranian chamber of commerce, told AFP that he was optimistic but said it was vital not to forget how bad the economic situation is.

“If certain sanctions are not lifted within six months, with the priority on those affecting banking transactions, half of large companies running on imported materials will close,” he said.

Iranian firms have had to resort to back channels just to survive, he said, explaining that the cost of doing business has risen by 25 percent because of this.

A European economic observer in Tehran agrees.

“The pressure is clearly on the economy. It is evident with high figures in unemployment and inflation, as well as the dramatic drop in production,” he said, speaking on condition of anonymity.

After Rouhani’s June election, “entrepreneurs in my country were optimistic but also realistic at the same time. They wanted to see what happens,” he added.

The momentum quickly began to build.

“I organised a regional meeting with a couple of small businesses,” he said.

He had expected 15 businesses to attend, but 50 came in the end.

“There is huge expectation,” he said.

And since Rouhani’s contact with Obama, “large companies are preparing to go back to Iran as soon as sanctions are lifted”.

French oil giant Total announced on Tuesday that it was ready to do just that.

“Today there is an embargo. This embargo is valid for everybody and we will wait for this embargo to be lifted,” its chief executive Christophe de Margerie said, adding that he hoped that this would happen “as soon as possible”.

Meanwhile, the priority is the normalisation of foreign relations because, according to the European expert, “Iran on its own cannot make its economy recover”.

He estimates that Rouhani has a grace period of less than a year to get the economy on the mend.

If his government fails to come up with tangible results, hardliners and those opposed to rapprochement with the West “will go on the offensive again”.

“For now, the Revolutionary Guards and the establishment, which have billions of dollars and economic clout, have no option but to give Rouhani free rein,” said the European observer, who remains optimistic.

“If Rouhani succeeds, their businesses could flourish. Iranians are opportunists.”