Iran’s return to the global market will add about one million bpd, therefore lowering oil prices by US$10 per barrel next year, according to the World Bank, which also expects economic growth in the country to surge to five per cent in 2016 from three per cent this year
Lifting sanctions related to Iran’s nuclear programme will have a significant impact on the world oil market, the Iranian economy and Iran’s trading partners, the organisation added.
If the agreement reached on July 14, 2015 is ratified, sanctions on Iran by the USA and the EU will be removed in return for Iran decelerating its nuclear programme. The World Bank’s Middle East North Africa (MENA) Quarterly Economic Brief, Economic Implications of Lifting Sanctions on Iran, sees Iran’s capacity to export more oil as speeding its economic recovery.
But the report also projects lower export earnings and revenue for MENA’s other oil exporters, such as the Gulf nations and Libya, while oil importers in the region, such as Egypt and Tunisia, will benefit from lower world prices.
Shanta Devarajan, World Bank chief economist for MENA region, said, “Just as the tightening of sanctions in 2012 led to a sharp decline in Iran’s oil exports and two years of negative growth, we expect the removal of sanctions to boost exports and revive the economy.”
Iran’s cost of doing trade will also fall, increasing not just the volume but the value of its oil trade and non-oil trade. The bank’s report estimates that exports from Iran will eventually increase, too, by about US$17bn, which is about 3.5 per cent of its GDP.
The UK, China, India, Turkey and Saudi Arabia are among the countries most likely to see the largest rise in post-sanctions trade with Iran. Foreign direct investment may increase to about US$3bn a year, double the current rate but still lower than its peak in 2003.
“Since the framework agreement of April 2015, we have seen increased interest from multinational companies in investing in Iran, especially in the oil and gas sector,” said Lili Mottaghi, World Bank MENA economist and the author of the report.
“That trend is likely to accelerate with the lifting of sanctions, providing much-needed capital and upgrading of technology to Iran’s oil sector.”
