Implications of the Iran Nuclear Deal for GCC
On July 14, 2015, it was announced that the P5+1 — the United States, the United Kingdom, France, China, Russia and Germany — along with the European Union (EU), had achieved a long-term nuclear deal with Iran . According to the U.S., the deal will “[…] will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran’s nuclear program will be exclusively peaceful going forward.”
Table 1: Key Elements of the July 2015 Nuclear Deal
| Key provisions of the deal |
| Iran will have to reduce by two-thirds the number of centrifuges that it currently has installed (from 19,000 to 6,000). Of the 6,000, only 5,060 will be permitted to enrich uranium over the next 10 years at a facility at Natanz. Among the remaining centrifuges, a few hundred will be permitted to operate at an underground plant located at Fordow, which will, however, not be allowed to enrich uranium. |
| Iran will cap its enrichment at Natanz at 3.67% of the isotope U-235, which is far below weapons grade. The cap is initially envisaged for a period of 15 years and Tehran has to reduce its stockpile of 10,000-12,000 kilograms of low-enriched uranium by 98%, i.e., to 300 kilograms. It is notable that the amount is only a quarter of what would be needed for a single nuclear weapon if the uranium were subject to further refinements in order to achieve weapons grade. |
Source: Various; For more info: Marmore Report – Geopolitical and Macroeconomic Implications of the Iranian Nuclear Deal for GCC
Within a week after the July 14, 2015, announcement was made with respect to a historic nuclear deal on the Iranian nuclear programme, the Iranian oil minister said that “(w)e expect the members of OPEC to pave the ground for (an) increase of Iran’s oil production that will reach global markets when sanctions are lifted,” If Iranian nuclear compliance to the deal succeeds in bringing about the concomitant removal of sanctions, then Tehran could gain access to about $150 billion in frozen assets, allowing the country to increase oil to 4 million barrels/day by 2017, according to Moody’s. For several countries of the GCC, this means depressed oil prices into the foreseeable future.
For those Gulf countries that do not enjoy the luxury of significant fiscal buffers, depressed oil prices over the long term will mean weakened national balance sheets. Tehran’s ~$100 billion stock market will also receive increased attention, which means international hot money will try to derive benefits from a hitherto closed, but fundamentally attractive, market . However, GCC countries like the Oman and the UAE have trading links with Iran, which could get further bolstered if Iran gets increasingly integrated into the international financial mainstream. For Kuwait, removal of sanctions on Iran could mean access to import Iranian gas, as the country’s natural gas requirements grow .
The Iranian nuclear narrative has seen several twists and turns over the past several years. Iran has been under sanctions in one form or the other for over three decades now. According to Marmore’s Report, an Iranian nuclear deal has significant geopolitical as well as investment implications, along with the fact that there are anticipations of removal of sanctions in a phased manner.
Table 2: Iran Nuclear Deal Implications
| Geopolitical Implications | Macroeconomic Implications | |
| Regional insecurities may rise in terms of fears that Iran may use the cover of the deal to progress towards becoming a clandestine nuclear threshold power | Following the deal, easing of sanctions would restore Iran’s access to global financial system and enable it to resume trading | |
Source: Various; For more info: Marmore Report – Geopolitical and Macroeconomic Implications of the Iranian Nuclear Deal for GCC