Post-sanction Iran offers business opportunities

The nuclear deal between Iran and Western powers, struck in the second week of July, has created optimism among many countries to enhance trade with Iran. India, along with few others, is in the forefront of these countries. For the last couple of months, in the run up to the deal, Indian businesses and experts started calculating potential benefits the country can gain.  They are now eying good business with Iran.
The deal, agreed by six powerful countries (United States, United Kingdom, China, Russia, France and Germany), will restrict Iran's activities to use atomic energy and lift western sanctions against Iran on trade and finance in the long run. Although it will take time and has to cross some more hurdles to be effective, India is counting on the deal.  
Lifting trade and financial sanctions means there is no bar for any country to do formal business with Iran and also make investment in the country. The western sanctions go beyond United Nations sanctions on arms, ammunition and contraband and are set to delink Iran from global trade and financial flow. The sanctions have succeeded to severely hurt the country's economic health and increase the sufferings of the Iranian people. Iran had to devise ways to reduce the devastating effects of the sanctions and have continued trade with partner countries like India.  For instance, Iran has some arrangement with India for making payments in Rupee, the Indian currency. In 2012, India was the second largest importer of Iranian oil after China although the import has declined sharply in recent years due to tougher western sanctions.
The bilateral trade between Iran and India, which stood at $520 million in 2000, increased to $10.6 billion in 2010 and $15 billion now. The Federation of Indian Export Organisation estimates that Indian export to Iran will touch $6.00 billion level this year.  The country is also expecting big jump in exporting Basmati rice and sugar. Already Indian public banks have started to devise strategies to revive their business with Iranian counterparts.  
It is expected that sanctions will be lifted gradually and Iranian economy will also rebound slowly from decade-long distress. In this process the country has to develop infrastructure and attract foreign investments. For strengthening financial services, there will be a big demand for IT-related services where India has good capacity. Indian infrastructure companies are eyeing construction of roads, railways and bridges. India has already signed a memorandum of understanding (MoU) with Iran for development of Chabahar port, situated in the south-eastern part of Iran.
When India is seriously tracking Iran's development for its long-term trade and investment gains, there is no visible move in Bangladesh by either the government or the businesses, in this regard. Keeping such aloofness will not be beneficial for Bangladesh in the long run.

Bilateral trade between Bangladesh and Iran is now little, but there is a good scope for increasing trade in the long-run if Bangladesh counts on ending the western sanctions on Iran. Value of bilateral trade stood at $72.16 million in FY06 which gradually increased to $160.3 million in FY11 with trade balance comfortably tilted to Bangladesh. Since then, trade has been reduced due to tougher sanctions.
Bangladeshi jute has a good market in Iran. The rigid sanctions forced Bangladesh to drastically reduce exports of jute to Iran. As Iran is going to open up, the market will be wider. Products like RMG, pharmaceuticals and textile will have good demand also. A new market can be opened in Iran for Bangladeshi products. It is to be noted that Bangladesh and Iran have preferential trade agreement, signed in 2006 under D-8 framework, to eliminate non-tariff barriers.
Of course, Bangladesh has to compete with many other countries   especially Pakistan and India. Pakistan's bilateral trade with Iran stood at $1.5 billion while trade balance tilted to Iran.
Bangladesh will be immensely benefited by importing oil from Iran at a cheaper rate. Moreover, energy cooperation between two countries will help Bangladesh to strengthen its energy security in the long-run. Seven years ago, Iran invited Bangladesh to join Iran-Pakistan-India oil pipeline project.    
Despite western sanctions, Iranian's annual economic growth rate stood at 2.2 per cent in 2014 which reflects the country's ability to  absorb severity of sanctions to some extent. The western power imposed harder sanctions on Iran in 2012. As a result, the country's Gross Domestic Product (GDP) sharply declined by 6.6 per cent in 2012 after posting 3.9 per cent growth in 2011. The country, however, managed to reduce negative effect of sanctions and so in 2013, economy posted negative 1.1 per cent growth and returned to positive territory in 2014.
Iran is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia, with an estimated Gross Domestic Product (GDP) of $ 415.3 billion in 2014. The Word Bank puts Iran in the upper middle-income country category.  
Bangladesh has historical ties with Iran through culture and trade. Former Iranian President Ali Akbar Hashemi Rafsanjani visited Bangladesh in 1995. And in 1997, prime minister of Bangladesh Sheikh Hasina visited Iran. She also visited Iran to attend Non-Aligned Movement (NAM) summit in 2012 and met with Iranian leaders to discuss ways and means of strengthening bilateral relationship.    
In fact, an in-depth study is in order to determine the scope of increasing trade relations with Iran in the post-sanction period. Country's leading trade bodies should take lesson from India and also take initiative for such a study with the help of research organisations.
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