What would a nuclear agreement mean for Iran’s economy?

World Finance examines what an end to Iran's nuclear standoff would mean for its economy, and the west

November 4, 2014

By November 24, a historic deal may be struck to resolve the Iranian nuclear standoff, but what would that mean for the country’s economy and, in turn, the west? World Finance speaks to Trita Parsi, President of the National Iranian-American Council, to discuss

World Finance: Well Trita, as the deadline for a nuclear agreement with Iran and the permanent member of the United Security Council, plus Germany, draws closer, who needs an agreement more, Iran or the west?

Trita Parsi: Both sides will be much better off if there is a deal, and both sides will face rather dire consequences if they fail to reach some form of a compromise, and that balance of interests is probably one of the key reasons as to why the negotiations have been this successful thus far.

[B]oth sides will face rather dire consequences if they fail to reach some form of a compromise

World Finance: Well the sanctions were intended to prevent Iran gaining the technology to develop its nuclear programme and punish the government members whose assets are frozen. So how much has this impacted Iran?

Trita Parsi: Well, the sanctions have impacted the general economy in a very very negative way, and has made the life of average Iranians quite miserable. It has, however, not affected the access to supplies, etc. for the nuclear programme in a particularly strong way. The Iranian nuclear programme has proceeded throughout in spite of all these sanctions, and officials in the government actually have a much easier time getting around the sanctions than the average Iranian citizen.

World Finance: You published a study this year looking at how much sanctions on Iran had actually cost the United States, so what figures are we looking at there?

Trita Parsi: We did an econometric analysis, looking at the lost export revenue, not just the United States but other European countries suffered as a result of these sanctions, and the number we reached, which is a very conservative estimation for several different reasons, was somewhere between $135 and $175bn. The Europeans only have had sanctions since 2010, but during the first three years of those sanctions the Europeans lost twice as much money as the US did during that same period. But of course, since they’ve had sanctions during shorter periods, they haven’t lost as much. The US has had very strong sanctions on Iran at least since 1994.

World Finance: Considering that this standoff has been bad for both Iran and the west, what are the real reasons behind the Iran-US stalemate?

Trita Parsi: It is a geopolitical conflict that is at the root of this, the nuclear programme in many different ways is just a symptom of a deeper problem. But that problem has now become so deep that if they didn’t resolve the nuclear issue, it could actually have spilled over into a hot conflict, a military confrontation. That is not something that would be to the benefit of the United States, the west or Iran, and I think that is one of the reasons as to why the two sides have come to the table and negotiated in a much more serious way than they’d done before, because they both realised that they really needed an exit ramp out of this escalatory dynamic that they had found themselves in.

World Finance: Well if the talks on the 28th do not end with an agreement, what will this mean for Iran and the rest of the world?

[T]he two sides are speaking much more comfortably and more confidently about the deal than they did before

Trita Parsi: If it ends in such a way that they’re going to have to have another extension a couple more months, then the crisis may be able to be postponed. If it ends in such a way that it’s clearly not going to be able to come back to the table, then it’s going to very much depend upon who the rest of the world blames for the failure. If the failure falls around the responsibility of the Iranians, then you’re going to see an intensification of sanctions and a ratcheting up of other threats as well. In fact, Wendy Sherman the American lead negotiator put it this way, she said “if there’s a failure, the name of the game on both sides is going to be escalation. The US is going to try to intensify sanctions, the Iranians are probably going to escalate their nuclear activities. There’s no one who will be winning from that scenario.

World Finance: So finally, how likely is an agreement?

Trita Parsi: Some of the problems that existed in earlier rounds appears to have been resolved, the two sides are speaking much more comfortably and more confidently about the deal than they did before, and also their messaging to the domestic audiences has shifted, and that’s a very critical point, because neither side was going to go on a campaign of selling the deal until they had at least a very likely deal, and since they have started that selling campaign, I draw the conclusion that they’re much closer a deal than many people may have thought.