To understand the reactions to the deal, just follow the money.
We finally have a deal.
After close to two years of negotiations, Iran and a group of six nations led by the United States have come to an agreement to lift many of the sanctions the international community has placed on Iran in recent years in exchange for promises to drastically scale back the Middle Eastern nation’s nuclear program.
The press has primarily discussed the deal in political terms. That any agreement was reached is a victory for the Obama Administration, which has devoted extensive man hours and political capital on the effort. But, as The New York Times reported on Wednesday, it appears that Congress will try its best to scuttle the deal. To do so, it would have to muster a two-thirds majority in both chambers to override a presidential veto, which might be difficult in an era where bipartisan agreement is hard to come by.
The reaction in other countries, like Britain, France, and Germany, has been far more positive. French and German foreign ministers are already planning trips to Iran, and earlier this year, the British ambassador to the U.S. said that international solidarity on Iran sanctions would likely erode if the U.S. Congress blocked a deal. There are many reasons for the difference in appetites for cooperation with Iran, but there’s one reason in particular that is hard to ignore: profits.
If one were to rank the various parties’ reactions to the deal—from Iranians celebrating in the streets all the way to the ice cold reaction the deal has received in Congress—you would find that they align very closely with the expected economic gain each of these parties would see from the deal. So, who will benefit most economically if the agreement is implemented as planned and most international sanctions on Iran are lifted? Here’s a list:
1. The Iranian economy: The Iranian economy has been severely harmed by Western sanctions, especially after the European Union agreed to a strict oil embargo and measures meant to cut the country off from the global financial system in 2012. Partly as a result of restrictions on sending hard currencies to Iran, the nation’s economy began to experience significant inflation of between 50% and 70% in 2013, while its GDP shrank by 5% that same year.
Nader Habibi, an economics professor at Brandeis University, says that if the international community is able to verify Iran’s compliance with the deal in the coming months, the effects of the agreement on Iran’s economy could be large and manifest quickly. He says the two most important sanctions are the oil embargo and the banking restrictions, the lifting of which would enable Iran to export somewhere between half a million and 1 million barrels of oil per day, and to receive hard currency in exchange for that oil.
The result would be an immediate infusion of tens of billions of dollars into the Iranian economy, which would allow Iran to invest in infrastructure or prop up consumption, Habibi says.
2. The oil industry: Prior to the EU enacting its oil embargo, European oil companies like Norway’s Statoil and or France’s Total have operated joint ventures with Iranian oil firms for years. They had to put those operations on hold in 2012. Once sanctions are lifted, those companies will be able to return to Iran and continue to invest in the country, which has the world’s fourth largest proven reserves of oil.
3. European car manufacturers: Yet another reason European politicians are eager to start doing with business in Iran again has to do with the continent’s car makers. Manufacturers like Volkswagen and Peugeot, which was the market leader in Iran before sanctions were applied, are eager to start doing business in the country again. The Paris-based automaker reportedly released a plan to reclaim the title of most popular car in Iran within hours of the nuclear deal being announced on Tuesday.
4. The financial services industry: Big banks have been the primary transmission mechanism for global sanctions against Iran, and they will likely benefit from the removal of sanctions in the years ahead. The benefits for this industry will be more slowly realized, however. D.E. Wilson, partner at Venable LLP and former Treasury Department Official, who worked closely on Iranian sanctions efforts there, says that “it will take time and resources” for the U.S. government to lift restrictions on the financial services sector and on U.S. businesses in general.
He cautions that, even if this deal is implemented according to the Obama Administration’s wishes, sanctions put in place against Iran as punishment for its involvement in terrorist activities will remain in place. Furthermore, he argues, the penalties the U.S. government has leveled against banks in recent years, like the whopping $9 billion BNP Paribas paid in 2014 for helping Iran violate sanctions, far outstrips any profits to be made in the country, and that we will see a the financial services industry only cautiously wade back into Iran.
Because U.S. businesses have, for the most part, stayed out of Iran since the nation’s 1979 revolution, there simply isn’t that much profit to be reaped by big business in the United States. That could, however, change. Habibi, for one, believes that the Iranian regime, for political as well as economic reasons, might seek the aid of U.S. oil and gas companies in joint ventures in order to give the United States a bit more of an investment in the preservation of the the accord.