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Thursday, July 23, 2015

Iran Set To Rejoin The World

The original post is from the Economist :

  • America’s Congress now has 60 days to scrutinise the deal.
  • With or w/o an agreement, the world is stuck with an Iran that continues to run a big nuclear programme, remains slippery and dangerous.
  • The real test of the deal is whether it is better than the alternatives. It is.
  • Some critics may believe that attacking Iran is the only option but war is a poor form of arms-control. 
  • Even if America had the stomach for a months-long campaign, and even if it could take out all of Iran’s many nuclear sites, bombing cannot destroy nuclear know-how. 
  • Instead the programme would go underground, beyond the reach of monitors.
  • Some worry that the deal will destabilise the region and encourage nuclear proliferation. 
  • Hard to see why Israel should feel more threatened than they do now. 
  • Israel has overwhelming nuclear and conventional military superiority.
  • The nuclear deal binds Barack Obama, America’s president, into the Middle East. 
  • Deal will make Iran more powerful, but it will also lead the country to become more open. 
  • Unlike North Korea’s Kim dynasty, which cheated on its nuclear pact, Iran’s supreme leader, Ayatollah Ali Khamenei, decided that being a pariah was worse for his regime than rejoining the world.
  • A country of Iran’s size and sophistication will get a bomb if it really wants one. Nothing can change that. But this pact offers the chance of holding Iran back and shifting its course. The world should embrace it, cautiously.
  • The streets of Tehran burst with jubilant cheering, flag-waving and the blasting of car horns to rejoice at the signing of a momentous nuclear accord between Iran, America and five other world powers.
  • As one celebrant put it, Iran had endured a political and economic fast lasting 36 years; it was at last rejoining the world.
  • The message was clear: sanctions and diplomatic isolation were coming to an end.
  • So many Western delegations have turned up in Iran in anticipation of a bonanza that its airport has opened a Commercially Important Persons lounge, alongside its VIP one.

  • If it works, the accord will contain Iran’s nuclear capability for at least 10-15 years. 
  • The hope is that, in the meantime, Iran and the region will have changed profoundly.
  • The most obvious consequence will be economic. 
  • Unlike its richer Gulf neighbours, Iran is not an oil-soaked rentier state, but a regional power with an industrial economy and lots of educated people who work.
  • Alone in the Gulf, it manufactures (and even exports) its own cars. For all its petrodollars, Saudi Arabia could not match Iran’s nuclear programme without outside help. 
  • The supreme leader, Ayatollah Ali Khamenei, has set a target of 8% average annual growth for the next five years, up from its current 2.5%. 
  • Some Western diplomats and financiers in Tehran reckon that, within a decade, Iran’s GDP might surpass that of Saudi Arabia and Turkey, the regional economic powerhouses.
Taken from The Economist

My thoughts : A deal is better than no deal, I would totally agree. The most profound effect is economic. Foreign direct investment will flow back in, jobs will be created for the hungry well educated people, quality of life will improve and together other social benefits.

Economics will trump ideology, just as it did in post-Mao China so my bet is all in that Iran will liberalize, furthermore it has a well educated population not peasants or farmers. 

Iran's economy if not for sanctions would have been close or slightly smaller to Malaysia's ($375 billion). The biggest prize is hydrocarbons: Iran has the world’s fourth-largest oil and second-largest gas reserves.

It is also estimated that the deal will allow Iran to pump an extra 2 million barrel per day by 2016 and almost double that by 2017 into the world market. This will certainly put oil at low prices that we continue to see now. Not good news for our O & G sector and the national coffer (Petronas - Malaysia's piggy bank). Tak apala Najib sudah implement GST kan.

Though it is still 2015, you can clearly see how the deal has had a knee-jerk impact on the oil price. It is now hovering at $50. Unfortunately a stronger USD compiled with a weaker MYR will again more or less offset any benefits. The joker has to go.

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