Lebanon eyes share in sanctions-free Iran
BEIRUT - Lebanon is counting on doubling trade with Iran a short time after the Islamic Republic is relieved of Western economic sanctions, while circles friendly with Tehran call for a revival of some of its old promises, including the army’s provision with weapons.
Iran is stepping up efforts to implement a landmark nuclear deal by January to benefit from sanctions relief, with European companies lining up for what could prove to be the most attractive opportunity in frontier markets globally.
On October 18th, Iran is to begin taking steps to meet its obligations under the July nuclear accord and the United States will issue waivers for specific sanctions. However, the defining moment will come when the International Atomic Energy Agency verifies that Tehran has taken the steps outlined in the agreement.
Lebanon counts on doubling its $100 million annual trade with Iran, according to sources at the Beirut Chamber of Commerce, Industry and Agriculture. However, banking ties, broken due to curtailing sanctions imposed by the United States on Tehran in 2007 to curb its nuclear ambitions, must first be restored.
“Lebanon banks had to sever their ties with the Iranian banks, fearing US retaliation if they didn’t,” a source with the Association of Banks in Lebanon said. “Restoration of banking ties is crucial for any later dealings to go forward.”
Iran, founder and financer of Lebanon’s militant Hezbollah, is widely seen as interfering in the smaller country’s domestic affairs, while Saudi Arabia supports moderate political factions.
A source at the Ministry of Energy played down positive effects about Iran’s return to the world oil market on Lebanese citizens’ energy bills. “While oil prices fell by more than 50% worldwide since June 2014, Lebanon’s energy bill shrank by 35% only,” the source told The Arab Weekly.
“Reasons include a murky pricing mechanism in Lebanon whereby government taxes and the shares of gasoline wholesalers and retailers remain untouched,” the source said. “While Iran’s imminent return to world oil markets is likely to lower prices further, but a lowering in the Lebanese energy bill, if it happened, is almost certainly going to be a fraction only.”
The Lebanese Businessmen Associations, known by its French initials RDCL, is preparing for visits to Iran. The first visit will be followed by sector-oriented visits, RDCL LBA President, Fouad Zmokhol said at a news conference. He noted that Iran has $100 billion worth of companies listed on the Tehran Stock Exchange. “Many companies are run well and are attractive to Lebanese businessmen,” he said.
Adnan Kassar, head of Lebanon’s Economic Associations, advised in July that any Lebanese business visit to Tehran should be well prepared. “Lifting the sanctions will be a good opportunity for both countries. Iran has 80 million people and its economy is the second largest in the region after its Saudi counterpart,” he said. “But any visit should be prepared for in accordance with the pace of lifting sanctions.”
An economist close to Hezbollah said Lebanon should work on reviving Iranian promises to invest in its electricity sector and provide its army with weapons. “The plans didn’t go through because of the sanctions, but should be pushed through with a sanctions-free Iran, especially in terms of electricity investments, obviously very much needed in Lebanon,” he said
In 2012, Iran proposed to sell Lebanon electricity at reduced prices. Tehran offered to provide Lebanon with 200-400 megawatts of electricity as the Lebanese faced increased rationing of their supply. Two years later, a senior Iranian official said Tehran would supply the Lebanese Army with military equipment to be used in fighting armed groups.
If the sanctions are lifted, Iran’s economy is expected to expand in 2016 when oil production, oil exports, auto production and expansion of trade increase. Iran’s stock market stands at $96.6 billion. The Tehran Stock Exchange rose 130% in 2013 and another 33% last November.
However, a government source warned, “Iran is likely to continue paying heavily for its involvement in the Syrian war, through its own Revolutionary Guards, through Iraqi Shia militiamen or through Lebanon’s Hezbollah,” he said.
“Even if its economy booms, Lebanon shouldn’t expect much from an economy at war.”