Iran: Brazil of the Middle East?
Last weekend’s interim deal between Iran and world powers opens up an opportunity for a revitalised Iran to use its economic influence to advance its interests, and some other countries in the region should benefit.
If negotiators reach a comprehensive agreement that lifts sanctions, Iran will strengthen its position as an economic power, a prospect that Israel and the Arab monarchies do not welcome, but that may bode well for Turkish growth and a relief of broader Middle East tensions, according to Noah Capital Markets strategist Emad Mostaque.
Comparing an Iran unencumbered by sanctions to a “Brazil of the Middle East,” Mostaque says the isolated country’s natural resources, educated populace, and industrial capacity mean it will see significant foreign investment if the spectre of a war with the West were to disappear completely:
This pick-up in foreign investment and real growth is the real way that Iran is looking to expand its influence and power in the region, not through nuclear weapons
But the United States’ traditional allies in the Middle East view Iran’s gain as their loss – to Israel, Iran is an existential threat, while Saudi Arabia believes Iran seeks to foment unrest among the Gulf’s restive Shi’ite minority.
Despite being on opposite sides of the civil war in Syria, Turkey could benefit from a revitalised Iran.
After Turkish setbacks in Egypt and Syria, Ankara is likely to seek economic partners and diplomatic allies where it can find them, with Iran currently its third-largest export market and a key energy provider.
The Noah note paints a much bleaker picture of Iraq, whose Shi’ite-led government is one of Iran’s most important allies.
The prospect of Baghdad bringing online several mega-fields in coming months and Iran returning from the wilderness may trigger another civil war next year by Sunni Iraqis fearful of Shi’ite economic and political dominance, it says.
Despite allies’ discomfort, the United States will come out ahead, as lower oil prices will keep gas prices low and further stimulate the economy.
Separately, Capital Economics says the weekend’s deal would have little immediate effect on oil markets, but an eventual end to sanctions is expected to bring oil prices to $90 per barrel by the end of 2014 and then to $70 by the end of 2020.
More broadly, the Noah report argues, as Washington “pivots” to Asia, it will have to broaden its base of contacts to stay relevant in the Middle East.
In the medium term, having moderate relations with a key regional power player like Iran even as traditional allies shift their objectives would be beneficial.
(By Shadi Bushra)