On 14 July 2015, Iran and the P5+1 power (United States, United Kingdom, France, China, Russia and Germany) reached a deal over a nuclear programme in exchange for the lifting of international sanctions. Since 2006 numerous sanctions have been imposed which consist of restrictions on its oil and gas exports, its ability to import technology to exploit its energy resources, restriction on shipping, insurance and trade, and being cut off from SWIFT, the financial messaging system used to transfer money between the world’s banks. However, it’s not clear yet when which sanctions will be lifted. Moreover, if Iran breaches any terms of the nuclear agreement, UN, US and EU sanctions will snap back into place. Sanctions related to other aspects of Iran’s behaviour, such as human rights issues, support of terrorism and its ballistic missile programme will not be lifted.

Impact on country risk

The nuclear agreement between Iran and the P5+1  pave the way for an easing of sanctions against Iran which would enable Credendo Group to re-open cover when the most severe sanctions (notably US sanctions on financial sector and EU sanctions cutting off Iran from SWIFT) are lifted. Before the sanctions can be phased out, there are still some hurdles to overcome. First, the agreement will have to be ratified by the US Congress in the next 60 days. Congress can delay approval, but is unlikely to be able to prevent ratification. Also the agreement will then need to be ratified by Iran's Majlis (Parliament), which is also likely to approve it. The lifting of sanctions, however, will only start after the IAEA is satisfied with Iran's implementation of various conditions within the agreement. This is likely to take up the next six to nine months. The Iranian economy was badly hit by the sanctions with real GDP growth shrinking for two consecutive years and high inflation. In 2014, growth recovered to 3%, thanks to the interim nuclear agreement and prudent macroeconomic policies. The removal of sanctions will boost Iran's economy even more. The economic implications for Iran of lifting the sanctions are enormous, but main benefits will probably not be felt until next year.

Analyst: Jolyn Debuysscher, j.debuysscher@credendogroup.com