Commentary

Lifting of Iran Sanctions Leads to Financial Volatility and Diplomatic Uncertainty

Middle East In Focus

Middle East Policy Council

The lifting of nuclear sanctions against Iran, punctuated by Iranian President Hassan Rouhani’s economic mission to Italy and France, continues to occupy much of the editorial and op-ed space in Middle Eastern dailies. Many of them express serious concern about the economic impact of the end of the sanctions regime, with many countries in the region worried about Iranian oil entering an already oversupplied world market. Beyond economic matters, a great deal of anxiety exists about whether Iran will spend its largesse on exporting insecurity. These commentators attempt to determine whether Iran is serious about its desire to become a fully integrated member of the international community or whether it will play a disruptive role in the region and more broadly.

In a recent editorial, The Nation editorial staff highlights the potential negative economic impact for the region following the lifting of Iran sanctions, pointing to the recent stock market volatility as evidence of further expected economic disruptions: “Experts estimate that the cost of doing business with Iran with the sanctions in place led to a 15% increase in prices at the very least. The previous year has been kind to consumers in the global oil market, with prices lower than recent years. The addition of more oil to this equation will only take the prices even lower. Stock markets are already plummeting in both Saudi Arabia and UAE in anticipation of the half million barrels to come from Iran....A price war is on the cards, and the prices of most commodities will be affected as a result. The only thing that remains to be seen is how far both countries will go in a bid to compete with one another.”

The Peninsula’s editorial also highlights the market volatility by citing a number of economic indices, characterizing “the mood in our region…not so upbeat. In stark contrast to the celebrations in Iran, the Gulf stock markets sank to multi-year lows at the news. The Saudi index plunged 3.3 percent to close at 5,838 points, its lowest finish since March 2011. Other bourses too panicked. Oil prices had fallen on Friday in expectation of the lifting of sanctions because Iran is expected to start oil exports. The market reaction is a reflection of the mood in the Gulf countries, which have always been wary of Iran’s agenda in the region....There is a genuine concern that Iran might use its new-found status to further its agenda. Tehran will be getting billions of dollars in frozen funds and this money can be used to increase its influence in the region. And Iranian oil is certain to roil the energy markets, with prices set to fall further....Tehran must refrain from actions that could be seen as interference.”

The concern expressed by the aforementioned editorial is reflected in other op-eds and editorials, including one by the National staff which poses the all-important question of “which Iran will emerge after sanctions end? ... Many are keeping a close watch on Iran for clues about whether the lifting of sanctions will result in Tehran continuing to export terror and foment instability in the region or whether it will join the rest of the world and play by the rules of international diplomacy....Whether Tehran will choose to be constructive or destructive, it will now have far more financial capacity to enact its agenda. Clearly, the countries on this side of the Gulf hope the moderates will prevail and Iran will realize it has far more to gain by joining the international community than from the meddling it has pursued in the region for decades. In that sense, it is up to Tehran to decide how the future will play out but it should note that it can have friends on this side of the Gulf if it can move on from its destructive policies.”

Given these expressions of concern for what lies ahead, it is not a surprise perhaps that in an op-ed for the Gulf News, Chiranjib Sengupta  suggests that if Iran’s intention is to assuage the concerns of the international community, it should start immediately  by taking action to match its reconciliatory words: “some benefits of the deal clearly appear to be ill-timed — the arrival of another half a million barrels of crude per day from Iran amid an oil market glut is hardly the global economic boost the international community would have envisaged in a post-sanctions era. More importantly, not everyone in Iran’s neighborhood would share the same euphoria over what Hassan Rouhani says is a ‘turning point’ for his country. Incidents such as the vicious attack on the Saudi Embassy in Tehran earlier this month, along with Tehran’s role in regional instability, show that such concerns are not baseless....It will be extremely unfortunate if Iran’s unfrozen funds lead to an escalation of conflicts in a region wracked by turmoil. Therefore, Tehran needs to demonstrate the same parameters of responsibility in its relations with its neighbors as it has shown with world powers in successfully completing the nuclear deal.”

But the idea of a peaceful Iran, argues Yedioth Ahronoth’s Alex Fishman, is fanciful and countries in the region can’t afford to close their eyes before the Iranian threat: “The Iranian military-nuclear technological clock has been set back. How much time have we earned? No one can say for sure. But that is the only silver lining in the agreement between Iran and several world powers....As far as Israel is concerned, the removal of sanctions from Iran is a ringing diplomatic failure. Israel could not convince the world, mostly the West, that Iran's potential threat to Israel and the stability of the Middle East consists of more than just its military nuclear program. Israel's demand that the crisis be used in order to restrain Iran's destructive policies in the Middle East fell on deaf ears....The Americans have chosen to ignore the Iranian missile industry, which covers most of the Middle East and reaches Israel. This necessitates Israel's continued preparation, both offensively and defensively.”

Those who are skeptical of a real turnaround are further strengthened by what Iran appears to be doing on the ground, which according to Asharq Alawsat’s Salman Aldosary includes refusing “to fully cooperate with the IAEA’s investigations on their ongoing nuclear weapon research, two terrorist cells caught on Bahrain were affiliated to both Iran and its Army of the Guardians, and Kuwait arrested a similar Iranian-militia associated cell on its grounds. All the aforementioned happened in six months only....The Iranian game, away from all Zarif’s attempts to polish his country’s government’s image has been revealed. It no longer fools anyone except those laying in the white house and those shutting their eyes so that they do not perceive “the Iranian support for terrorism” which happens to be Iran’s official stance.”

The Khaleej Times editorial, on the other hand, tries to take a more hopeful approach, suggesting that caution rather than fear should govern the attitude of Iran’s neighbors: “Should the GCC and Arab countries be concerned about this development? No. Cautious? Yes. And rightly so. Over a decade of sanctions did not stop Iran meddling militarily in other countries through its proxies. Lebanon, Syria, Iraq and Yemen are prime examples....The GCC and the Arab world will be closely watching its actions as it gets back into business after years of biting sanctions. It's important to follow Tehran's money trail after this deal. A flexing of conventional military muscle and its role in proliferation of weapons will only complicate efforts to reach lasting peace in the region....t is important that Iran does not go down the revolutionary road once again under the influence of extremist elements within the establishment. A sanction-free Iran will benefit the world economy, no doubt. Trade ties could get a boost and ordinary Iranians will reap the benefits. Suspicions will linger if the regime does not end its covert political and military activities in the region as its economy opens out to the world.”


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