Airbus plan heralds Iran boom after sanctions lifted

Sun Jan 17, 2016 7:36am EST
 
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By Andrew Torchia

DUBAI (Reuters) - A purchase of more than 100 aircraft from Europe's Airbus may be one of Iran's first big deals in a trade and investment boom that could reshape the economy of the Middle East.

"The legs of Iran’s economy are now free of the chains of sanctions, and it’s time to build and grow,” President Hassan Rouhani tweeted on Sunday, a day after world powers lifted sanctions on Tehran in exchange for curbs on its nuclear program.

Hours earlier, his transport minister Abbas Akhoondi told the Tasnim news agency that Iran intended to buy 114 civil aircraft from Airbus (AIR.PA: Quote) - a deal that could be worth more than $10 billion at catalog prices.

Airbus said on Saturday it had not yet held commercial talks with Iran, and businesses operating in the Islamic republic will continue to face big obstacles for the foreseeable future.

Risks include indebted Iranian banks, a primitive legal system, corruption and an inflexible labor market. Many foreign companies will remain wary of investing in Iran because of concern that the sanctions could "snap back" if Tehran is later found not to be complying with the nuclear agreement.

But the Airbus plan underlined Iran's potential: with about 80 million people and annual output of some $400 billion, it is the biggest economy to rejoin the global trading system since the Soviet Union broke up over two decades ago.

The nuclear deal removed restrictions that stifled Iran's economy for most of this decade - on banking, money transfers, insurance, trade, transport and procurement of technology.

This will allow Iran to satisfy pent-up demand for goods and services that it had trouble obtaining at affordable prices under sanctions, from aircraft to factory machinery, medicines and some consumer goods such as cosmetics and branded clothing.   Continued...

 
A cleric walks past a currency exchange shop in Tehran's business district, Iran, January 17, 2016. REUTERS/Raheb Homavandi/TIMA