EIU Take: A comprehensive agreement between Iran and the US Imminent

A historic Deal
A comprehensive agreement between Iran and the US on the former’s nuclear programme is looking tantalisingly close. While the impact on the nuclear and energy markets are rightly the focus of much analysis, there are two other ways in which the deal may have an even bigger longer-term impact: through deepening the region’s Sunni-Shia split and on Iran’s emergence as a foreign direct investment hotspot.

With Iran, the Middle East’s pre-eminent Shia power, firmly on the margins, Sunni regimes have largely dominated. If Iran is able to play a bigger political and economic role in the world, this balance could shift in a substantial way – and with some interesting results, such as creating common ground between Israel and some of the Sunni powers.

The economic impact could be even larger. At just under 80m, Iran has the world’s 17th largest population while, on a purchasing power parity basis, we estimate that it is the world’s 14th biggest economy, ahead of Spain and Canada. It is also a relatively diverse economy compared with the Gulf states. If Iran truly opens up to the world, the opportunities will be immense, though companies will need to navigate a very challenging business environment.

Any deal will take time to implement, and there is a lot for Iran to do, so large impacts will be slow to come. Nonetheless, are you excited by Iran’s possible re-emergence? Do you think it will happen? Let me know your thoughts on Twitter @Baptist_Simon or via email on simonjbaptist@eiu.com.

Best regards,

Simon Baptist
Chief Economist and Asia Regional Director

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