The expected implementation of last year’s nuclear agreement will see Iran transformed as it reconnects to the global economy. In the capital, businesses hit by years of sanctions are cautiously optimistic

Tehran’s historic district of Tajrish, a former village on the foothills of the Alborz mountain, is now one of the capital’s busiest and vibrant neighbourhoods, home to luxury shopping centres selling Mont Blanc pens and Versace clothes, albeit from unofficial boutiques.

The Iranian capital, and particularly this area, does not have the look of a city functioning under one of the world’s most stringent sanction regimes: businesses are running as usual and trade bans have not stopped imports of products from companies such as Apple, Bosch or LG.

But beneath its skin, Tehran’s soul has been badly damaged by a decade of internal political struggles and severe financial restrictions.



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This weekend, things are set to change, as Iran finds itself on the brink of an extraordinary transformation. The Iranian foreign minister and his European and American counterparts are expected to convene in Vienna to announce “implementation day” – when the International Atomic Energy Agency verifies that Tehran has met all its commitments under last summer’s nuclear accord, triggering the removal of all nuclear-related sanctions and reconnecting Iran to the global economy.

The ramifications at home and abroad will be profound – “the return of the biggest economy to the global system since the break-up of the USSR”, as a Morgan Stanley put it in a report. Iran is the second-largest economy in the Middle East after Saudi Arabia, with a GDP of $400bn. It has the world’s largest reserve of natural gas and the fourth largest resources of oil. About 70% of the 80m population are under 35 and half of the population have smartphones and are members of at least one social network.

The mood in Tehran is upbeat, but many remain cautious, aware that the situation is not going to improve overnight. “We are currently in stagnation,” said the owner of a small underwear boutique at Ghaem shopping centre close to Tajrish Square. “People are out of money and desperate to see how things are going to change.”

In the Andisheh shopping centre in eastern Tehran, Hassan, who sells foreign-made clothes, is optimistic: “What is important is that the lifting of sanctions will have a huge psychological impact on peoples’ minds. Many are in limbo. They simply don’t know what to do with their money. But after sanctions, people are likely to take out their assets from banks and invest and bring about much-needed growth.”



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Hamzeh, who runs an IT shop on Karimkhan Avenue in the heart of the city, says sanctions hampered the flow of computer equipment and led to the closure of many businesses. “We are hopeful and we think that after the removal of sanctions the situation will change,” he says. “It will get easier for us to import the latest hardware and bring down some of the costs we endured because of the intermediaries.”

Saiid Abdollahi sells backpacks and suitcases on Manouchehri street.“We would be able to represent foreign brands and bring better quality goods with real warranties, which will attract more customers,” he says. “People are reluctant to buy at the moment. Even if they have money in their pockets, they want to wait and see, but we are hopeful that the lifting of sanctions will bring back confidence to customers.”



A sales assistant at a men’s beauty shop says a pack of Gillette razors that sold for 170,000 rials (about £3) before the rial nosedived now cost more than 480,000 rials (over £8). “Compared to four years ago, we’re selling one-third of what we used to,” he says. Another shop owner who sells handicrafts is pinning his hope to an influx of foreign tourists. “People in Iran don’t buy our goods, they are not really interested. Foriegn tourists coming here can really boost our sales.”

A computer science student says she hopes to access previously unavailable software. A construction business boss eyes a reinvigorated housing market.

Facebook Twitter Pinterest President Hassan Rouhani at the opening of a section of the South Pars gas field facilities in the southern town of Assaluyeh. Photograph: HO/AFP/Getty Images

Since the nuclear agreement, there have been dozens of multinational companies extending their efforts in Iran, jockeying for pole position, says Sarosh Zaiwalla, sanctions lawyer representing a number of Iranian clients including Bank Mellat (Iran’s largest private bank) and Bank Tejarat.

“Iran’s reengagement with international markets has been supported by new legislation designed to attract more foreign investment into the country, removing previous restrictions on the percentage of foreign shareholding in Iran and even opening up the possibility of registering an Iranian company with 100% foreign capital,” he says. “This is a particularly important development for the energy sector, in which Iran is hoping to attract $30bn of foreign investment to help realise its ambitions to increase oil production.”

Bijan Khajehpour, a managing partner at Atieh International, who has been advising companies on entering markets in Iran, says the administration of Hassan Rouhani has already been steering the economy towards growth thanks to good financial advisers. The level of inflation, which was more than 40% when Rouhani took office in 2013, is now believed to be about 15%. That has been achieved despite sanctions.

“The economy of Iran is like a human being who is under a great deal of pressure from various sources, but the lifting of sanctions will give it a momentum,” he says. “Not all the pressures are going to be removed but the economy will have time to take a breath. So the first impact will be psychological, such as in the housing market which is very important in Iran. But people are now in the wait and see mode.”

Many businesses, along with ordinary people, are closely monitoring the fluctuation of the rial, which they think is indicative of how the economy is doing. Some are hopeful the removal of sanctions will lead to cheaper dollars to buy but Khajehpour says they are likely to be disappointed in the short term because the government’s priority is to stimulate exports.

“Non-oil exports play a major role in Iran’s economy now and exporters are not interested in cheaper dollars. Iranian products will be cheaper when the dollar is stronger,” he says. Only 15% of Iran’s GDP is dependent on oil, making its economy relatively diverse compared to some of its neighbours. 50% of the economy is based on services.



In the short term, Iran is going to benefit from $100bn in frozen assets being released, $30bn of which are expected to become available on implementation day. The remainder is already spoken for in investment or other commitments.

“The big unknown is how the wider sanctions scenario will be played out. Iran needs foreign banks and investment to step up energy infrastructure investment,” says Morgan Stanley’s report. “However, foreign companies are mindful that the majority of the US sanctions will not be removed. There is also considerable uncertainty about the kind of scenarios that could trigger ‘snap back’ of the removed/suspended nuclear sanctions.



“Such uncertainties and the complexities of navigating the sanctions that remain in place may impede foreign direct investment and slow the pace of economic reintegration and growth.”



Hossein Rassam, an Iranian analyst and former Iran adviser to the UK foreign office, predicts an immediate, positive impact on the Iranian economy.

“But sanctions and mismanagement took their toll, and the scale of the long-awaited economic catharsis won’t be grand,” he says. “Nevertheless, the Rouhani administration will get an opportunity to help lead the Iranian economy out of recession, inject fresh blood and also fix structural faults that are more responsible for its economic paralysis than just sanctions.”

A Tehran-based journalist contributed to this report.



