Iran – Chance or Change or both?
A look at challenges and opportunities
Until 2013, Mahmoud Admadinejad was the leader and president of the Islamic Republic of Iran. During his two presidential terms, his policies and his political views were discussed widely and intensively. Apart from the well-recognized threats against Israel and the United States, he was also in favour of Iran’s nuclear program. In 2013, his second term ended and due to the limitation of the Iranian constitution, he could not run for another presidential term. Therefore, he was followed by Hassan Rouhani, who is seen as a reformist. Still, Iran is an unknown and somehow mysterious country that the world knows little about and was labeled part of the “Axis of Evil” by George W. Bush. This article is about the current development in the Islamic Republic of Iran after the Atomic Agreement from 2016 and sheds some light on the current challenges and opportunities.
Located in Central Asia, Iran has many borders with other countries and has access to the Persian Gulf and the Indian Ocean. Until 1935, Iran was known as Persia and became an Islamic republic in 1979. This revolution was led by Ayatollah Khomeini who represented an adversary to the pro western and secularizing efforts of the Shah. Furthermore, the regime of the Shah had become increasingly oppressive, brutal, and corrupt and had to deal with food shortages and inflation. Therefore, many different groups such as students supported Khomeini.
After the revolution, a theocratic governmental system was established that gives a lot of political power to the Supreme Leader of Iran. The first Supreme Leader was Ruhollah Khomeini, who is elected by the Assembly of Experts. After the death of Khomeini, the second Supreme Leader is Sayyed Ali Hosseini Khamenei. Nowadays Iran is an Islamic republic with strict rules and strong clerics in the Assembly of Experts who supervise the rules of the Koran. Women have to cover their hair with a scarf and men should wear long trousers for instance. Also, there is a complete prohibition against alcohol consumption for Muslim citizens. Iran has a population of more than 80 million people who are by a great majority Muslims.
Iran – current developments: Rouhani and Atomic Agreement
In 2015, the diplomacy of many different countries and organizations reached an agreement with Iran about their atomic program. This agreement is seen as a great and important victory for the region and for world security. It was reached between the five permanent members of the United Nations Security Council (USA, Russia, China, France, United Kingdom), the European Union with Germany (as part of the “EU-Troika” with France and the UK) and Iran.
Mogherini, the High Representative of the European Union for Foreign Affairs and Security Policy named this agreement a sign of hope for the whole world. Frank-Walter Steinmeier concluded with this agreement that Iran will not be able to adopt or build a nuclear bomb due to the agreed reduction of uranium enrichment inside the Iranian nuclear sites. Furthermore, he named the doors that are now open to solve important conflicts in this region and the reanimation of the diplomatic talks between Iran and the USA. In addition, Steinmeier sees the chances for German companies after the lift of sanctions that took place in 2016. The negotiations lasted for more than 10 years, so this agreement can be called a historic one.
Dr. Hasan Rouhani, a moderate conservative cleric, was elected to be the next president of the Islamic Republic of Iran. He is seen as a critical part of the agreement because he re-initiated the negotiations that were interrupted by the Iranian government in 2009. He also named a new main negotiator and gave the competence to the Iranian Ministry of Foreign Affairs. He also said that Iran never intended to build a nuclear bomb, but to use the nuclear technology for peaceful purposes instead.
The economy of Iran consists of the main basic sectors agriculture, industrial and the service sector. In 2015, the GDP reached almost 400 billion US-$. The state has a strong influence in the economy due to their central planning activities and the state ownership of oil and other large enterprises. Furthermore, the state indirectly controls companies that deal with the country’s security forces. Also the country has to face many problems that arise from inflation, price controls, corruption and other inefficiencies. The lack of oil revenues followed by the international sanctions from 2012 on led to spending cuts and a currency depreciation. Also many educated young Iranians left their country to find employment overseas.
Apart from the high oil and gas reserves, Iran developed a biotechnology, nanotechnology and pharmaceuticals industry to make the country less vulnerable to oil and gas exports. Furthermore, Iran has leading manufacturing industries in the fields of car-manufacture and transportation, construction materials, home appliances, food and agricultural goods, armaments, pharmaceuticals, information technology, power and petrochemicals. In the service sector, tourism plays a crucial role for the economy as well. Many beautiful building, like the Shah Mosque, the ruins of Persepolis and an amazing landscape make Iran worth a visit.
As mentioned, Iran has significant oil and gas reserves, which are the fourth and second largest reserves by country, respectively. With new technologies and the sanctions relief Iran will become a crucial player in the world oil and gas market in the next years.
Iranian-Germany economic and diplomatic relations
The official diplomatic relations between Iran and Germany began in 1952 after the end of the second world war when Iran opened its first diplomatic mission office in Bonn. In 2005 Germany had the largest share of Iran’s export market, and in 2008, German exports comprised almost 85 percent of the total German-Iranian trade volume. In 2010, the value of trade between Iran and Germany was around 4.7 billion euro and Germany was the biggest trade partner before the embargo. According to German sources, around 80 percent of machinery and equipment in Iran is of German origin.
After the sanction relief, German companies are keen to re-build the economic relations with Iran. The German Chambers of Industry and Commerce (DIHK) has estimated that the sanctions against Iran cost more than 10,000 German jobs so there are many opportunities. But not only the large countries like Siemens, BASF or the car manufactures may benefit from the relief – also small and mediums sized companies may benefit from stronger trade between these countries. Estimates state that the export volume might reach ten billion euro in ten years. The importance of this agreement was also shown in the visits by high representatives of the German politics and the companies – for example Sigmar Gabriel, who visited Iran only a few days after the agreement was reached.
The main economic field that German companies might benefit from is the field of machine and plant construction, the infrastructure und the health technology. All these areas have accumulated needs that have to be met. Also the financial sector has to be developed due to the strong restrictions with regard to international withdrawals.
Prospects for our company might arise from the need to back up financial investments, to provide critical knowledge with regard to the economic and political situation and to provide insights into the infrastructure and the best way to implement it. But by all enthusiasm and the good prospects we should be aware of the strong religious and cultural differences. Iran is still limited with regard to the access to the financial markets and bureaucratic obstacles. There, significant economic improvements resulting from sanctions relief will take months or years to materialise.
(Project for English class. Completed in June 2016.)