Economy, Domestic Economy

National Economy and Nuclear Talks

National Economy and Nuclear Talks
National Economy and Nuclear Talks

The future of Iran’s economy depends on the way it is going to be managed by the government, rather than being solely dependent on the results of ongoing nuclear talks with the P5+1 (the five permanent members of the UN Security Council plus Germany), an academic has said.

In an interview with ISNA, Alireza Shakibai, a member of the faculty of economics of Shahid Bahonar University of Kerman, analyzed how a possible final agreement with the six world powers over Tehran’s nuclear program will impact the future of economic development in Iran.

“In its 20-Year Vision Plan, Iran has set a target to turn into a regional economic power by 2025,” said Shakibai, adding that achieving such a goal requires broader interaction with the world.

Concrete steps must be taken before the country can attain its proper position in the Middle East, he added.   

  Stock Market

Talking about the future status of the stock market in light of the outcome of nuclear negotiations, Shakibai said that “coming up with optimal results will generate positive expectations in the stock market.”

The stock market is expected to experience a slight growth if favorable results are achieved in the nuclear talks, he predicted. However, he asserted that the stock market will not experience “any dramatic changes” even if a deal is agreed upon.

If the negotiations lead to unfavorable results, Shakibai said, negative news will lead to days of slump and a subsequent recession in the stock market, a trend it went through a few months ago.

 Regional Reaction  

The result of nuclear talks with P5+1 would definitely influence the whole region, the university professor asserted.  

“Arab countries like the UAE and Saudi Arabia, for example, will not be pleased if the negotiators come to positive conclusions,” he said, adding that they might feel that “their interests could be endangered as a result.”

 Oil Market

Shakibai anticipated that in case of positive developments in talks, the oil prices, which have recently fallen below 80 dollars following a steady downward trend in recent months, would probably surge above 100 dollars again.

“Tensions in the region would lead to an increase in oil prices,” he said. However, there are other players in the market that determine the trend of the oil market, Shakibai added.

“The European Union on the one hand, and the US, Russia, and China on the other, are other influential players in determining oil prices,” he said.

As there are other variables involved, it cannot be predicted that reaching an agreement or failing to reach one can affect the oil market this way or another, said Shakibai.

“The nuclear issue is just one of the many various variables involved in determining oil prices,” he said.

 Currency Market

Iran has picked up a controlling currency system, which puts the whole process of regulating the foreign exchange market in the hands of the government and the central bank, said Shakibai.  

“Otherwise, the currency could have experienced a downward trend in the past six months, as a result of the positive atmosphere created by the negotiations,” he asserted.  

However, as the government had adopted a stable currency regime, currency prices did not go through sharp changes, he added.  

“The future rates at the foreign exchange market will depend on the currency policy adopted by the government, rather than the result of the negotiations,” he said.

Shakibai said that the government may not give up the current foreign exchange controlling system for at least the next three to four years, “so that no fall in currency prices will happen regardless of the result of negotiations.”  

However, he noted that as it is specified in the law, after the end of the current critical economic situation, the policies will move towards a floating exchange rate system, as “solutions that are based on controlling the currency market can be utilized only in the short-run.”

 Foreign Investment

How can Iran attract foreign investors depends on creating a favorable business environment by the government and also on what will come out finally of the nuclear talks, according to Shakibai.

“Business environment, tax regulations, labor law, social security and insurance, among other things, can affect the presence of foreign investors in Iran,” he said, pointing to cultural and political environment as other factors.

In order to attract foreign investors, tax regulations and labor laws, in particular, need to be revised, Shakibai asserted.

A positive outcome in nuclear talks would certainly have a positive psychological impact on the market, which could “lead to economic stability and as a result bring back predictability to the national economy,” the economics professor said.   

However, it is more important to invest in the required infrastructure for attracting foreign investment in the first place rather than waiting for the outcome of the talks, Shakibai suggested.