January 16, 2016, marked “Implementation Day” in Iran — the day when partial sanctions against the country were officially lifted in accordance with the Iran nuclear deal. Called the Joint Comprehensive Plan of Action (JCPOA), the agreement cleared the way for Iran to sell oil, trade goods and engage in the banking sector in exchange for halting its nuclear program. The deal also allowed the country to recover a portion of its frozen assets.

Iran

Iran

As the end of the year approaches, the question remains if the economy in Iran has improved since then. From the outside, it seems like some progress is being made: Just last week, Royal Dutch Shell announced it had signed a memorandum of understanding with Iran’s state oil company for future exploration in the country, on the heels of a similar agreement between Iran and France’s Total SA for the development of a natural gas field. And this week, Boeing and Iran Air announced a $16.6 billion deal for the delivery of 80 aircraft. Back in January, France’s Airbus signed a provisional agreement with Iran to deliver 118 aircraft and to oversee the renewal of the country’s civil aviation system. That deal is expected to be finalized in the coming weeks, with the first delivery of jets expected just after the new year.

All of this is taking place in the wake of President-elect Donald Trump’s campaign rhetoric against Iran: He labeled the Iran nuclear agreement as one of the worst deals the U.S. has ever negotiated. “It is true that Trump could unilaterally withdraw the United States from the agreement…. It is not a treaty, and foreign affairs are within the purview of the Executive,” says Philip Nichols, Wharton legal studies and business ethics professor. “But Trump will have very little leverage over the Iranians to negotiate some sort of different deal.”

Great Expectations

Despite the recent announcements by Shell and others, the situation in Iran has not changed drastically since partial sanctions were lifted. “The general feeling is that people are frustrated because relief from sanctions [hasn’t really materialized]. Part of the disappointment results from expectations. People thought the sanctions would be lifted and everything would be glorious right afterward,” says Kyle Olson, a Penn doctoral candidate in anthropology whose research focuses on Iran.

Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, agrees. “Iran’s economic recovery was moving slowly, but steadily. Many people expected sanctions relief to led to a gold rush, but it was always going to take time to create momentum in a complicated marketplace,” he notes. However, “what is promising is that if you look at different indicators since January, all the right players who were expected to return to the market have made headway, such as Airbus, Total and Siemens.”

Olson points out that there is still a large portion of Iranian assets that are frozen in American banks because of violations including human rights abuses. According to CNN, about $50 billion in frozen Iranian assets were freed up and returned to Iran. According to Nichols, “Much of that money has gone into the resumption of commercial relationships [that existed] between Iran and European businesses before the imposition of the nuclear sanctions.”

“Trump will have very little leverage over the Iranians to negotiate some sort of different deal.”–Philip Nichols

The impact on trade also has been minimal so far. Other than for Boeing, “The lifting of the nuclear deterrence sanctions has, predictably, had little effect on direct exports from the United States,” Nichols notes. In fact, January to September exports from the United States to Iran fell by about 5% compared to the same period last year. “The numbers are so small that a 5% decrease is not that large; it just demonstrates that the lifting of one set of sanctions did not have much of an effect. Interestingly, exports from Iran to the United States during the same periods increased from nothing to about $62 million from 2015 to 2016.”

Will Trump ‘Dismantle’?

Experts are unsure how Trump will approach the Iranian deal when he takes over the Oval Office in the beginning of 2017. During his campaign, Trump referred to the Iranian deal as a “disaster” and promised to “dismantle” the agreement.

The U.S. election result was unexpected in Iran. “People in Iran and elsewhere thought it would be a [Hillary] Clinton victory. She would have continued Obama’s policy of ‘warming up’ to Iran and a continuation of the JCPOA,” says Nicholas Masoud Gilani, chief investment officer at CommoditEdge, based in Tehran, Iran and Dubai, U.A.E.

Gilani notes that Trump’s win may have put a “wrench in the works,” but it’s not a pullback. “It’s like coming to a stop sign and stopping the car until there’s more visibility, at least in the short-term. In the medium- and long-range outlook, business in Iran will continue to expand, perhaps even more under a Trump presidency,” he predicts.

“The Iran deal is not just an agreement between the U.S. and Iran,” Batmanghelidj points out. “The U.S. was the critical party in starting the negotiations with Iran, but the deal relies on the buy-in of Russia, China, France, Germany and the U.K. There are clear security and economic interests for these other countries to keep this deal alive.”

Nichols agrees. If Trump were to follow through on his campaign promises, “the European nations are unlikely to join the United States in renewing sanctions…. [Russian] President Vladimir Putin would likely veto any attempt to renew sanctions through the Security Council. So it would just be the United States. The United States could use its strength in the financial system to try to prohibit banks anywhere from interacting with Iran, but the world is probably getting a bit tired of that threat and has worked out ways around it.”

Another question is whether Europe can take on a leadership role in safeguarding the Iran deal. The deal was between Iran and Germany, France, the United Kingdom, Russia, China and the U.S. The next wave of right-wing populism is coming in Europe, along with Brexit and eurozone economic issues, adds Batmanghelidj. These challenges could distract European leaders from taking a strong stand in maintaining their agreement with Iran.

“Many people expected sanctions relief to led to a gold rush, but it was always going to take time to create momentum in a complicated marketplace.”–Esfandyar Batmanghelidj

“Oddly, if Trump should choose to attempt to destroy the sanctions deal, his best allies might the conservative element in Iran,” Nichols notes. “Conservative leaders in the religious establishment have suggested that if the United States walks away from the agreement, then Iran will resume the development of nuclear weapons. That might affect the positions of some European nations.”

‘Huge’ Potential

Iran is often viewed as an emerging economy with a huge amount of potential. With a population of 80 million people — a large proportion of which consists of a growing middle class of consumers — it’s a market that shouldn’t be ignored, especially by business-minded leaders, like Trump. “Iran’s GDP is bigger than South Africa’s. It’s the largest emerging market in the world and the largest economic market outside the G20. I hope the economic issues will take over political issues and act as a bridge,”

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