By Dalga Khatinoglu
The political deal between Iran and the P5+1 continuing to strengthen the stock markets' performance and Iranian rial against foreign currencies.
The U.S. dollar was sold at 32,830 rials on April 6, 2 percent to 3 percent less than the rates before a political deal was achieved on April 2.
However, the Tehran Stock Exchange main index (TEPIX) which stood at 61,500 points on March 17, has been strengthening to 71,286 on April 6. TEPIX stood at around 65,000 a day before the political deal. The figure is even lower than it was two years ago, when TEPIX reached above 87,000 points in September 2013, a few months after President Hassan Rouhani won the elections.
Tehran Stock Exchange main index during last two fiscal years (Mar 2013 to April 2015)
For Iran which experienced around 8 percent GDP contraction during a period between imposing Western sanctions in mid-2012 and reaching an interim nuclear deal in November 2013, it's vital to reach a deal to ease biting sanctions, especially with an estimated 1.5 percent economy growth in 2014.
Suspension or elimination of the sanctions will improve Iran's economic performance, but not suddenly.The huge affect of sanctions was halving Iran's oil export, which shares about 20 percent in GDP.
The country's GDP decreased from about $550 billion in 2011 to about $369 billion in 2014. On the other hand, Iran's rial has dropped in value by more than three times since 2011.
According to a report prepared by Iranian former Minister of Road and Urban Development Ahmad Khorram for the Expediency Discernment Council, Iran has lost about $460 billion from sanctions between the Q2 of 2012 to the same period in 2014.
Regarding this fact that the comprehensive nuclear deal would be achieved June 30, then the current sanctions would be remained until this date. It's not expected that Iran could resume oil export to a level on 2011, but Iran has reportedly about 30 million barrels of crude oil stored on tankers.
Iran also has cut oil production from some fields due to halving its oil export. The country can increase crude oil production by 300 to 500 thousand barrels per day to around 3.1 to 3.3 million barrels, but regarding the present stored crude oil, as well as tough competition between Iran and other oil producer on the international markets which has faced the glut, it's not expected that the country's oil production and export increase significantly until the end of year.
Regarding the low oil prices, expected to continue for months, it seems lifting oil export-related sanctions doesn't help Iran's economy significantly, however Iran has about $100 billion blocked reserves abroad which can be released and transferred into the country during the second half of current year to be fed to projects, including the energy sector. These funds can also push the national currency to strengthen more.
Dalga Khatinoglu is an expert on Iran's energy sector, head of Trend Agency's Iran news service.
Follow him on @dalgakhatinoglu
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