Iran back in business

A good 36 years after the Iranian Revolution of 1979, Iran appears to be all set as a global business player with its nuclear frame agreement made with P5+1 countries on April 5, 2015 after a good two years of back channel diplomacy, secret bi-lateral meetings and formal extensive negotiations. The formal deal has to be inked before 1st July 2015 wherein a lot more of technical details need to be filled in.
The agreement is largely considered as a win-win for both parties. P5+1 wants to prevent Iran from getting a nuclear weapon, whereas Iran's pressing need is to gain relief from sanctions that have ratcheted up in severity and are having a crippling effect on its resource dependent economy in particular the restrictions on its oil and gas exports, ban on import of technology and banking impediments.
With the deal sealed and all ends targeted to be tied up by end June 2015, Iran's economy is expected to become integrated with the world enabling it to play a significant and transparent global role in politics and economy in a fast changing economical and political world order.
Iran is reported to be the 2nd largest population in the Middle East with 80 million, 9% of proven oil reserves, 18% of proven gas reserves and abundance of strategic minerals. With GDP of about US $370 billion, Iran's economy is about 20% smaller than it would have been without sanctions according to a study. Driven by the growing and demanding middle class the economy, after the lifting of sanctions, has the potential to grow in double digits.
The country also has a strong industrial base and is a heavyweight in cement and steel industry.
Iran's government under President Hassan Rouhani well strategized to open up to the world with a business-oriented tone and become integrated to be part of global business fraternity. President Rouhani opted to participate in the World Economic Forum at Davos in 2014 where he closely networked with the global business and political leaders largely on a one-to-one basis. He sent the message of "constructive engagement" to the global business and political world. Iran is also reported to have sent positive signals to American oil giants to do business after 36 years of absence.
The timeframe for Iran to bounce back in business is linked to dismantling of sanctions which is not an easy one. President Obama's government will have to work hard with the Senate and House of Representatives to pass a legislation to reverse the extensive work done by his administration to tame Iran.
But, while US sanctions are still in place, eager investors are queuing up for door to open for business in Iran. All the five-star hotels in Iran are reported to be full of Western, Japanese and Chinese companies eager to position themselves for business in Iran.
Heavyweight and business thirsty European companies appear restless to re-enter Iran and take back the positions they once commanded. While the formal agreement is yet to be signed and sanctions against Iran officially lifted, European companies are already taking the first steps to reconnect with Tehran - a strategic move well reciprocated by Tehran. Germany, France and the UK with Germany leading the way, have teamed up to form the European-Iranian business alliance to facilitate commerce between the EU and Iran. Germany alone expects its exports to rebound to 10 billion Euros per annum once the sanctions are lifted. Same are the ambition levels of France, the UK and many of the EU members. With these proactive actions, hopes and business-driven ambition of the EU, the US is under extreme pressure to make sure that the agreement reached early this month is formalised by the deadline of 1st July 2015.
Under the changing scenario in Iran, one needs to revisit its impact in our region. It was in 1964 that the RCD was established for political and economic cooperation between Pakistan, Iran and Turkey. The RCD was reborn and converted into the Economic Cooperation Organisation (ECO) when the original members of RCD met at Islamabad in 1990. In 1992, the membership was extended to nine members when Pakistan, Iran and Turkey being the founder members, decided to take on board six additional members, namely, Afghanistan, Azerbaijan, Kyrgyzstan, Turkmenistan, Uzbekistan and Kazakhstan. ECO members have a population of over 300 million people, rich heritage, cultural similarity and territorial contiguity.
The ECO is a remarkable organisation but is under-leveraged and largely dormant. Unlike countries in Southeast Asia, many of the ECO member countries have not yet come up as emerging markets on the global scale in spite of great manpower and natural resources. The issue is largely that of poor state governance and lack of skills to put the act together.
Pakistan, Iran and Turkey, have a great responsibility to take a leading role in building up ECO. The China-Pakistan economic corridor becomes more relevant with ECO countries' geographical significance. This ECO fraternity's closeness will position Pakistan at an event greater level of economic and strategic importance.
The other important subject which has once again bounced back is the Iran-Pakistan gas pipe line. With sanctions being lifted from Iran, Pakistan needs to move out of its ostrich syndrome and take some bold decisions. There is nothing better for Pakistan to meet its energy needs than the gas from Iran which is a clean, fastest and the cheapest option. Pakistan's energy needs can be well met by the natural gas from Iran, our indigenous gas and coal, our hydro power potential, nuclear power and a bit of renewable energy to fill the gap. Options based on imported coal, LNG and similar are not likely to fly as viable options to meet the energy needs of Pakistan which demands availability and affordability.
It is now a wake-up call for Pakistan to take a considered and firm decision on Iran-Pakistan gas pipeline as Turkey is also in a dire need of gas from Iran and is working on it and so is Oman which plans to lay a 1000km pipeline from Iran. India is also reported to be planning on same lines.
(The writer is Chairman Avant Ventures and former President of OICCI & ABB - Asea Brown Boverie Pakistan)