Middle East

Iran nuclear deal: Five effects of lifting sanctions

Economic sanctions on Iran have been lifted after it agreed to roll back the scope of its nuclear activities. What does this mean for Iran and the rest of the world?

A major crisis has been resolved, for the time being

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Iran says the crisis was unnecessary, insisting it never wanted a nuclear bomb. But the P5+1 group of powers - the US, China, Russia, UK, France and Germany - argue that the world is now safer.

The alternative would have been a military attack on Iran's nuclear facilities - something that could have triggered a regional war, possibly drawing in the big powers.

Critics, including Israeli Prime Minister Benjamin Netanyahu, argue that the agreement prepares Iran to become a nuclear power in 15 year. They say lifting sanctions will make Iran an economic powerhouse and will bolster its ability to wage war in the region and cause mischief. Mr Netanyahu has issued a statement saying Israel is watching Iran's adherence to the agreement.

Iran's Gulf Arab neighbours are worried

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For Iran, the nuclear agreement's so-called "implementation day" ended more than 10 years of crippling sanctions and international isolation.

The deal enables Tehran to become an active member of the international community once again.

Inevitably, this strengthens Iran's position in a region where most Arab countries are deeply concerned at what they perceive as Iranian Shia expansionism.

Sunni-ruled Gulf states view the nuclear agreement and the lifting of sanctions as a threat and a sign that the West is getting closer to Tehran at their expense. They fear Iran could become more daring in its interventions in the conflicts in Iraq, Syria and Yemen.

The US and other Western powers are keen to enlist Iran's help in the fight against so-called Islamic State (IS) and in the efforts to put an end to the Syrian conflict. But Saudi Arabia and its Gulf allies are not convinced Iran can be part of either solution.

Their stock markets fell sharply after sanctions were lifted, even though a third of Iran's imports come from the United Arab Emirates (UAE).

Iran will see an economic rebound

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The lifting of sanctions has opened the Iranian economy - one of the last great untapped emerging markets - to international trade and investment.

Iran can now return to the oil market, and is expected to start exporting an estimated 300,000 barrels per day immediately. This, in an already oversupplied market, will contribute to the falling price of petrol for consumers across the world.

Iran will also have access to more than $100bn (£70bn) of money that was frozen overseas. However, it can only spend about $30-50bn, as the rest is thought to be been locked into previous commitments.

The money may be used to import goods and services to renovate and modernise many of Iran's economic sectors. Already, Tehran is in talks to buy Airbus passenger aircraft by the dozens. The lifting of banking sanctions also means Iran is reconnected to the world financial network.

Critics of the deal say Iran will have more money to buy arms and bankroll its client militias locked in wars in the region.

Iran-US relations are unlikely to improve

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Almost four years of direct secret and open talks between Iran and the US - which have no diplomatic relations - helped bring about the nuclear deal.

The US and Iran have now removed the most important source of tension between them. But huge problems remain.

President Barack Obama has spoken about challenges ahead: Iran is a destabilising factor in the region, threatens Israel, violates human rights at home, and supports terrorism abroad.

Iran's Supreme Leader, Ayatollah Ali Khamenei, is equally suspicious of US actions in the region and its intentions in Iran. He has made it clear that the nuclear agreement is not going to be allowed to open the way for engagement with the US on other issues. And the hardliners around him, including the commanders of the Revolutionary Guards, feel humiliated by the deal. They will no doubt take every opportunity to hit back, with the US responding to their every move.

Rouhani gets a boost ahead of key elections

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Iranian President Hassan Rouhani described the day the sanctions were lifted as a "golden page" in his country's history and something that could transform its economy.

Mr Rouhani can claim credit for transforming the outlook for Iranians. He was elected on the promise of ending sanctions and has kept it, to the consternation of his hardline rivals.

A hardline newspaper, Vatan-e-Emruz, criticised the nuclear deal as "burying Iran's achievement in cement" - a reference to the removal of the core of the Arak heavy-water reactor and the filling of the cavity with cement last week. The newspaper was also very clear that Mr Rouhani wanted the sanctions lifted in time for February's parliamentary elections.

The polls will be the first test of whether the hardliners can turn the tide in their favour. The president remains vulnerable. Even though the sanctions are gone, Iranians are unlikely to see any immediate benefit before a real turnaround in the economy, which even at best estimates may be a year or two away. High consumer prices are unlikely to come down that fast.

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