Baku, Azerbaijan, Sept. 14
By Azer Ahmadbayli – Trend:
Oil & gas and automotive sectors are the backbone segments of Iranian economics and rank first and the second in Iran’s industrial sector.
Their share accounted for about 23 and 2,2% of total GDP respectively.
Both sectors have been badly affected, if not to say worn out during the continuous sanctions period.
For instance, before the last sanctions imposed in 2011, share of auto industry in Iran was 10% of the total GDP. It is worth saying that Iranian statistical data may vary in the range of 10-15% in different years.
The Islamic Republic's oil and gas industry needs substantial investments and new technologies. A number of onshore oil fields have stayed half-developed or put under conservation. Oil extraction rate in the country, making 20-25%, is staying below the world's 30-35% average.
Oil equipment and infrastructure, having been used for decades, are crumbling and require replacement, especially in the upstream sector. The formidable challenge for Iran is that about 80 percent of its active fields are in their second half-life and lose 0.3 mb/d of their productivity annually.
To satisfy these needs, Iran's oil and gas industry requires a $200 billion investment, including $130 billion in the upstream exploration/production sector, Iranian officials admit.
The same is observed in the country’s auto industry. The nation's car making industry is suffering from poor quality. According to the Iran Standard and Quality Inspection Company rankings, about 54 percent of home-made cars failed to meet the required standards last year.
Obstacles in production of spare parts made Iranian car manufacturers turn to Chinese low-quality products, Akbar Mirza-Hosseini, car industry expert and the Vice-chairman of Iran's Rakhsh Khodro Diesel Company, believes.
He said that European investments and cooperation with European car manufacturers can have a positive impact on the performance of the industry and improve the quality.
So, setting aside all other details of Iran-West relationship, it becomes clear that it is in vital interests of Iran to revive its core industries as it would bring greater profits and new jobs.
The nuclear deal has become an excellent opportunity to actualize these objectives through a rapprochement with the EU as the traditional trade and energy partner of the Islamic Republic.
Possible decision of US President Trump to cut the deal may (or not) affect incipient new ties with Europe as the latter is a close political ally of USA, and, in general terms, threatens Iranian multi-objective plans of the state’s overall development.
After 1979, when Iran turned into hostile state for the whole West, it learned to demonstrate high class diplomacy ranging from skillful flexibility to toughness verged on launching a war. Now we observe Iran showing steadiness.
A couple of days ago Iran proposed to draw up a new arrangement for the 2015 nuclear deal (JCPOA) in case the US unilaterally leaves the accord.
“The JCPOA is not an agreement between Iran and the US … one side of the JCPOA is Iran the other side is the six countries including the US. We already have ties with the five other countries. If the US walks away from the JCPOA, we will need to have a new arrangement,” Iranian government spokesman, Mohammad Baqer Nobakht, told IRNA.
This is perhaps the only correct decision depending on the current circumstances. It would, if launched, leave Washington alone and change the 5+1 formula.
Anyway, Iranian proposal fuels reflection, and the deal’s signatories should think twice before taking any final decision.