Baku, Azerbaijan, Jan.9
By Leman Zeynalova – Trend:
If the recent protests in Iran rumble on or even spread, the resulting disruptions to activity are likely to weigh on the country’s economy but the fallout for the rest of the Middle East and North Africa (MENA) economies, as well as global oil markets, should be limited, according to the British economic research and consulting company Capital Economics.
Moreover, if the Iranian regime reacts to protesters’ calls by scaling back its interventions in regional conflicts, the protests could help to soothe the geopolitical tensions that spooked investors late last year, said the analysis obtained by Trend.
Iran saw turmoil and political unrests over the past weeks, which took the lives of at least 22, including security forces.
The unrests began after some groups joined demonstrations in a number of cities, including the capital Tehran, Mashhad and Kermanshah to protest against high prices, but the economic protests soon turned into anti-government demonstrations.
“For what it’s worth, the Iranian regime has withstood previous bouts of unrest, including the much larger protests that erupted following the re-election of President Ahmadinejad in 2009.
Back then, a security crackdown caused the protests to fade – and the regime seems to be reacting in the same way now. While such security measures have worked in the past, there’s no guarantee that they will be successful this time around and the regime runs the risk of fuelling the protests,” said the company.
Capital Economics analysts believe that if the protests rumble on or even spread, Iran’s economy is likely to suffer.
“Spillovers into the rest of the region, however, are likely to be limited. Only the United Arab Emirates (UAE) has significant trade ties with Iran. This is perhaps why there has been a muted reaction to events in Iran in the region’s financial markets,” said the analysis.
There is also likely to be minimal impact on the oil market for now, according to the consulting company.
“Admittedly, an Iranian militant group claimed to have attacked an oil pipeline in the south of the country. But this doesn’t appear to have been directly related to the protests and, in 2009, unrest had little impact on Iranian oil production. Oil prices have been broadly flat since the protests broke out,” said the analysis.
Capital Economics analysts believe that the key now is how the regime responds to the protesters’ demands.
“Given the focus on economic issues, Rouhani may use the protests to strengthen his hand against the hardliners and accelerate his reform drive. Meanwhile, there’s a possibility that Tehran decides to scale back its support for allies in the region which, in the broader context, would be seen as a positive step,” said the company.
After all, the analysts believe that such a move would probably help to soothe tensions with regional rival, Saudi Arabia, which have threatened to boil over in recent months.
“This could open a path towards resolutions for the conflicts in Syria and Yemen, as well as the diplomatic crisis with Qatar. Easing regional tensions would probably loosen the alliance between Saudi Arabia, Israel and the US – which has been aimed at countering Iran’s influence in the region – and perhaps soften US opposition towards Iran’s nuclear deal,” said the analysis.
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