What the Iran deal could mean for business
Around the world, the formal announcement of a final nuclear development agreement between a U.S.-led group of six nations and Iran prompted widespread speculation about just what the deal would mean across a range of activities, from geopolitical jockeying to oil production. Not the least among those implications is what the deal might mean for doing business with, and in, Iran.
From a business perspective, the stakes are huge. By the numbers alone, Iran -- with 81 million people and 13 percent of the world's proven oil reserves -- should be a major global trade player.
But since the U.S. started imposing economic sanctions on Iran in 1987, Tehran found itself increasingly isolated, plagued by high unemployment, a currency in steep decline, deteriorating infrastructure and an exodus of young Iranians looking for a better life abroad.
"The potential for opportunities for trade and growth are significant if Iran really opens up to the world," said Paul Wachtel of New York University's Stern School of Business. "It is a country with oil and a well-educated labor force. A large economy like that coming back into an integrated world economic order would be really significant."
But Wachtel said there's a major "if" tied to that prospect. "That integration can only happen if this nuclear deal is part of an Iranian political shift to a broader openness to the world. You need that trust factor that's still not there yet."
Experts say part of what may have driven Iran's leadership to close a deal with the U.S. and reintegrate with the world economy is the nation's increasingly youthful demographic profile. Close to 42 percent of Iran's population is 24 years old or younger, compared to the U.S., where just 35 percent of the population is in that cohort.
"This younger Iranian generation was not even born during the Revolution of 1979" when the American embassy staff was taken as hostages, said Farok Contractor of Rutgers Business School Newark. 'They are more predisposed to American movies, music and culture."
Contractor noted that in reality "it will take years" before American companies will actually be able to do business in Iran. "That's because President Obama made it clear that this agreement is not based on trust," he said.
"It's a really bizarre economy. Iran exports crude oil and imports gasoline," said Contractor. "There's a lot of potential for American multinationals. But what we will see is that countries like China, India and Russia with companies already there will benefit."
Last year, Iran booked close to $96 billion dollars in exports, with almost a third of that volume going to China. Other major trade partners include Turkey, India, South Korea and the United Arab Emirates.
The nuclear pact calls for the lifting of sanctions as part of a multiyear process, but some trade experts say impacts will be felt more immediately. "Sanctions affecting trade are likely to be the first removed, with third-party countries such as India, South Korea and South Africa likely to also lift sanction in the coming weeks," wrote Firas Abi Ali, head of Middle East Analysis for economic research firm IHS in a note.
But Ali also had a word of caution for prospective investors looking to break into Iran: "Doing business in Iran will not change overnight as the country suffers from an outdated legal system, restrictive labor laws and a lack of significant experience in dealing with international investors."