Domestic Economy

Structural Issues Hindering Economic Recovery

Structural  Issues Hindering Economic  RecoveryStructural  Issues Hindering Economic  Recovery

Domestic critics of the government are questioning the results of the nuclear deal with the West and fretting over weak recovery.

However, economist Sadeq Zibakalam says expectations are too high and misguided, and that the heart of the problem is Iran’s ailing government-controlled economy.

Now in the post-sanctions climate, Iranian and western trade delegations scurry back and forth. But Iran is struggling to repatriate its earnings, and to turn its memoranda of understanding into contracts, according to The Economist.

Zibakalam, speaking to our sister publication Tejarat-e Farda economic weekly, likens Iran’s situation with a marathon runner that has weights attached to his feet.

“We know for certain that the runner has no chance of winning the race, but that does not mean if we take those weights off, he will get a gold medal,” he said.

From this point of view, some of the weight of sanctions was taken off in January. But the runner is frail, like it was before the sanctions.

“The removal of sanctions, at best, means we have returned to 2003-4 fiscal year conditions, before sanctions were intensified. The question is: was the Islamic Republic of Iran’s economy developed in 2003 or 1993 or 1983? The answer is a resounding no!” Zibakalam says.

Doing business with Iranian companies is difficult, despite Iran’s stability in a volatile region, its educated population, its well-developed road network and its potential as a regional hub, as they have veered far from global business standards, an issue noted by European banks that have looked into Iran.

Zibakalam raps critics of the government for scaring off potential foreign investors with threatening speeches.

“There are only a few European companies that have Enhanced Oil Recovery technology for increasing the amount of crude from an oilfield, but when you give scathing speeches, you prevent such technology from entering Iran,” said Zibakalam.

“This has nothing to do with the nuclear deal. With current technology, it is only possible to extract 20-25% of the oil in place from Iran’s fractured carbonate reservoirs, 10% less than the world average.

“Rouhani’s critics say the deal had no benefits. Why don’t they come and say why it had no benefits? What alternative do these critics offer? Going back to the former president Ahmadinejad’s days, when we told the world impose as many restrictions as you want and we’ll do what we want?”

With international vessels supporting Iran’s own tanker fleet, traders have now told Reuters that Iran’s oil exports was now close to pre-sanction levels of around 2.5 million barrels per day.

However, as long as homegrown scaremongering continues and Iran’s business environment remains poisoned, the Iranian economy will underperform.