Iran is set to receive a major economic boost after the peace agreement with the US that promises to lift decades of sanctions, unlock tens of billions in frozen assets, and establish a $300 billion reconstruction fund.
The agreement offers Tehran a chance to end its international isolation, export oil and gas without constraints, and bring in foreign investment to rebuild infrastructure bombed in the three and a half months of the US-Israeli war against Iran.
But experts caution that any short-term gains – albeit tangible – will likely be limited and conditional.
A full recovery from the effects of war and the decades of international alienation will require Iran to overcome deep structural, political, and regional obstacles, they say.
Oral Toga, a researcher at the Ankara-based Centre for Iranian Studies (IRAM), tells TRT World that the immediate economic impact of the peace deal is real, but narrow and reversible.
“Almost everything concrete – the lifting of sanctions, the release of frozen funds and the $300 billion reconstruction plan – is tied to a final deal that still has to be reached within 60 days,” he says.
Mustafa Caner, an Iran expert and assistant professor at Sakarya University’s Middle East Institute, tells TRT World that the lifting of sanctions and access to frozen funds will be Iran’s “single biggest gain”.
Sanctions limit a country’s ability to trade with the outside world. Once sanctioned, a business or bank can’t make transactions in major currencies or use SWIFT, the mainstay of the global payments network that banks rely on to process cross-border trade.
Since the 2010s, sanctions have been the principal factor crippling the Iranian economy, he says.
Their removal will allow Iran to sell oil without restrictions and gain access to technological innovation across sectors.
Under the agreement, the US will grant waivers to Iran for oil sales and related services, such as banking, insurance, and transportation, as the two sides hash out details of the peace deal during the 60-day negotiation window.
The US will terminate sanctions fully once Iran meets technical benchmarks.
As a result, Iran’s economy will rejoin the SWIFT system, easing cross-border trade.
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Toga doubts claims that the US-Israeli bombing had crippled Iran’s oil infrastructure.
“The strikes on Kharg Island, which handles close to 90 percent of Iran’s crude, spared the oil terminal itself. The real constraint was the closure of Hormuz and the naval blockade, not lost capacity,” he says, while referring to the narrow waterway between Iran and Oman through which one-fifth of global energy supplies passed before the war.
Once the blockade is completely lifted, crude exports can return to pre-war levels of roughly 1.7 to 1.8 million barrels daily within weeks, he says.
Iran was still producing around 3.2 million barrels a day amid intense US-Israeli attacks during March.
Restarting the gas production process, however, will be slower because South Pars, the Iranian portion of the world’s largest natural gas field, came under attack during the war, he says.
Broader economic damage to Iran has been steep: Tehran itself estimates losses of about $270 billion in the first 40 days of the war, with petrochemical and steel sectors having lost most of their capacity, he says.
“The oil can come back fast. The economy as a whole cannot,” Toga says.
The $300 billion jackpot?
The promise of a $300 billion reconstruction package rests on the premise that private businesses and investors from a number of countries – rather than the US government – will step in and invest in reconstruction projects in Iran on a commercial basis.
All the US will do is issue the necessary licences and waivers to enable private-sector investment, especially from the Gulf region.
Reports say preliminary pledges for more than $150 billion are already in from different countries.
This will be the first time in nearly five decades that Iran will meaningfully open its economy to substantial foreign direct investment.
Previously, foreign businesses shied away from investing in Iran because they feared losing the ability to conduct dollar-based transactions under secondary sanctions.
Caner notes that the sum is “almost equal to Iran’s annual GDP”.
But it will not be transferred to Iran in a single block. “Iran will be able to access it in line with a consensus reached, particularly with the Gulf states that contribute to it,” he says.
