LONDON (MarketWatch) — A big country, with healthy demographics. Very low debts. Plenty of room to catch up with the rest of the developing world. And a ton of oil in the ground. This surely is one emerging market that everyone wants to invest in.

Except so far it has been completely ignored. Why? Because it’s Iran.

For the last three decades, it has been a pariah state, deliberately excluding itself from the tide of globalization that had lifted up so many other new economies.

Now, however, that could be about to change.

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Iran has a reformist government. It is making peace with its old enemies, and opening up to foreign investment. It already has one of the best-performing stock markets over the past year, but still has only a fraction of the valuation of other frontier bourses.

Thirty-five years since it seemed to turn its back on modernity with the overthrow of the shah, it is starting to re-connect with the rest of the world.

If that continues, Iran could very quickly turn into one of the hottest investment opportunities of the next two decades.

True, there are plenty of challenges ahead. The political situation remains delicate. There are plenty of local conflicts it could get dragged into. The economy could still collapse. And sanctions have yet to be completely lifted.

But the gradual emergence of Iran as a major new economy is a reminder that, for all the problems the global economy faces, there is still plenty of growth ahead as new countries join the ranks of developed nations.

“It’s like Turkey but with 9% of the world’s oil reserves,” argued Charles Robertson of the investment bank Renaissance Capital in a recent note on the country.

He has a point. The fundamentals of the Iranian economy look as attractive as any emerging market, and arguably more so. Iran has a population of 78 million, about the same as Turkey, and more than any of the emerging economies of Eastern Europe. Add in the numbers of people, and the amount of oil, however, and Iranian gross domestic product is already substantial. At $437 billion, it is the 27th largest economy in the world, roughly similar to Argentina and Taiwan, and ahead of Austria or Thailand.

But it still has the potential to double that at least, and could do so in a relatively short space of time. The country it most resembles is Turkey, and until the trouble that hit that country this year, that was one of the big economic success stories of the last decade.

Iran has an excellent geographical location, sandwiched between Europe, Russia, the booming markets of the Gulf, and close enough to much of Asia to trade with that region as well.

It has decent levels of education — roughly the same as Turkey — and the added advantage of oil. Its energy resources are rich enough to fuel the economy, without being quite so large relative to its population that it turns into a petro state such as Saudi Arabia. There are not many other frontier markets with that kind of profile.

The local stock market has already noticed. The Tehran index was up by a 130% in 2013. It has fallen back this year, but this market was always going to be volatile. Right now, less than 0.5% of Iranian stocks are held by foreign investors, so there is plenty of room for that to grow.

The key to its development is political reform. President Hassan Rouhani has already toned down the aggressive rhetoric towards its neighbors, and embarked on far-reaching economic reforms.

This year, however, is going to prove challenging. Inflation has been running at more than 20%, and the government is having to push through big cuts in subsidies and spending to try and stabilize the budget. That is going to hit ordinary people hard, and there is no guarantee that the government can survive that program.

More importantly, no one knows what will happen to the sanctions imposed on Iran for attempting to develop nuclear weapons. Since January, they have been partially suspended following an agreement on arms.

But two things need to happen now. The sanctions need to be lifted permanently and completely. No economy can develop while it is blocked from trading with the rest of the world. And Iran needs to be able to sell its oil on the global market to fund the reforms it needs.

Will it happen? There is no reason it shouldn’t, so long as Rouhani can maintain his grip on power.

The country needs money to stay afloat. Unless it can sell its oil freely, it is not going to be able to finance itself. The renewed tensions with Russia are not going to hurt either. Iran has a long border with former Soviet states such as Turkmenistan. And the West is going to want to keep it onside if it can rather the risk it falling into the arms of Vladimir Putin. The U.S. and Europe might not be as dogmatic about the conditions for lifting the trade embargo as they would have been six months ago.

If sanctions are fully lifted, that could be the trigger for a flood of investment.

The French are already getting ready. A delegation of French business leaders visited the country last month to pave the way for deals. The car manufacturer Renault has already resumed shipments to the county, and other companies are looking to start production. Close on 80 million people is a big market for European multinationals, especially at a time when growth is so slow at home.

Just as significantly, with sanctions lifted foreign investors and fund managers will be able to start buying shares directly on the Tehran exchange.

There are not many big new countries left to join the globalized economy. Nigeria is closing to joining the developed world. Egypt is slipping back into chaos. North Korea shows no signs of wanting to join the modern world. But Iran could be the last great frontier economy to be developed.

The only question is who will be brave enough to exploit it.

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