It costs between $59 and $114 a barrel to develop an oilfield in Canada or the US, but the expense in Iran doesn’t exceed $31, according to the International Energy Agency (IEA). That explains why Iran is tempting for the Big Oil even after a 40% plunge in prices over the past year with the world awash in crude.
From oil to mining, banking to financial markets and consumer goods to automobiles, such enticing equations explain why the eventual end of economic sanctions on Iran is being portrayed as a gold-rush investment opportunity.
Iran now is on track to become the largest economy to rejoin the global economic system since post-Communist Eastern Europe in the early 1990s.
World powers and Iran set the clock ticking on October 18 on a landmark accord placing limits on the Islamic Republic’s nuclear work in return for access to global oil and financial markets. The procedure to lift the embargo, a milestone referred to as “Adoption Day”, began 90 days after the UN Security Council endorsed the deal signed in Vienna on July 14.
Despite the formal adoption of the deal, foreign firms will not be able to jump on to the Iran bandwagon right away. All sides will now have to begin delivering on the pledges they made three months ago. Iran has to mothball thousands of centrifuges, eliminate 95% of its enriched-uranium stockpile and halt a reactor capable of making plutonium. The US and Europe will, in turn, make preparations to lift sanctions, which will occur on “Implementation Day,” once the Iranian measures are in place.
Tehran hopes that day will come quickly - in less than two months - but Washington is more cautious. “For us it’s important that it’s done right, not that it’s done quickly,” a senior administration said.
But clear signs are now emerging that it won’t just be a smooth ride for outside investors and Tehran will impose tough terms that could clash with US regulations even after sanctions are lifted. Iranian President Hassan Rouhani cautioned on August 29 foreign investors would face tough terms on partnership or investment. “If foreign companies think they can take control of a market of 80mn people, they are mistaken, and we must not allow it,” he said.
Twelve years after Iran was found concealing some nuclear activities, prompting concern it had weapons ambitions, the nuclear deal has been described as a victory of diplomacy over the potential use of force. But mutual distrust still remains.
Can Iran be trusted in the long-term? There’s an overwhelming concern in the region that Iran will use the political and economic leverage it reaps from the nuclear deal and the eventual easing or lifting of sanctions to exert its power in a volatile region. From support for Syria’s oppressive regime to military co-ordination with Russia, from bellicose ballistic missile tests to intervention in Yemen, Iran is not helping to address that concern.