Azernews.Az

By Sara Rajabova

There is a struggle between the White House and Congress, for a while, on imposing new sanctions on Iran if it fails to conclude a nuclear agreement with world powers.

The U.S. Congress introduced legislation on new sanctions on Iran last week, which was sharply criticized by the Iranian officials.

However, the U.S. President Barack Obama urged the Congress to refrain from imposing new sanctions against Iran, saying these sanctions could scuttle the negotiations.

Obama warned he would veto a bill imposing new sanctions on Iran, because it could sink a final deal over Tehran's nuclear program. He said he would support tougher sanctions later if Iran violates the agreement.

The author of book "The Evolution of Macroeconomic Theory and Policy", professor of economics at U.S. Northeastern University, Kamran Dadkhah shared his views on this issue with AzerNews.

Dadkhah said currently, there is little chance of imposing new significant sanctions on Iran.

"Even the bill introduced in the U.S. Senate imposes sanctions if Iran violates the deal reached in Geneva or if it is expired with no long-term agreement. The proponents of the bill argue that this is a clear signal to Iran and will strengthen the hand of the president in negotiations. Iranians have said that such a move would be against the spirit of negotiations and could cause them to abandon the process altogether. Indeed, should this bill pass, President Rohani's team of negotiators would be under pressure from domestic opponents of negotiations to withdraw; hence President Obama has threatened to veto the bill. But the U.S. Treasury has a freehand to strengthen financial sanctions," Dadkhah said.

He noted that the American oil companies are reluctant to contact Iran and other oil companies would wait for a strong signal before getting serious.

"In the meantime, the Pentagon is investigating Anham FZCO, a large military supplier, for moving supplies through Iran to Afghanistan. In sum, the new sanctions will not be imposed till it is obvious that no long term accord would be reached, but in the meantime existing crucial sanctions will be enforced vigorously," Dadkhah said.

He noted that such sanctions would give excuse to the hardliners in Iran to accuse the West of insincerity and the Rohani government of capitulation. Dadkhah said even without new sanctions, the negotiations aren't progressing that much, and the failure of the two rounds of technical negotiations supports the idea.

Nuclear deal between Iran and Western countries: realty or myth?

Speaking on the possibility of a final deal between Iran and the Western countries and the sides' readiness for the normalization of relations in the near future, Dadkhah said lifting of sanctions and restoring normal relations between Iran and the United States would be tremendously advantageous to Iran and Iranians.

"Thus, if the objective is to promote the well-being of Iranians, then the government of Iran should not hesitate a minute and should use all the means at its disposal to reach an agreement," he said.

He went on to say that such an agreement will open the door for normal relations with the West and the reintegration of Iran into the world economy.

"But there are powerful people who owe their positions and fortunes to the bogus activity of opposing the United States and Israel. These individuals and groups will not easily give up the source of their fortunes and would fight the process of normalization with tooth and nail," Dadhkhah said.

"However, on the Western side, there are also some powers that do not want the normalization of relation with Iran," he added.

"On the Western side, there are a number of the United States allies who are not happy with the Washington-Tehran rapprochement. These include Saudi Arabia and Israel. Thus, it seems both the Obama administration in the U.S. and Rohani government in Iran are interested and ready for normalization of relations, but the road is fraught with obstacles," Dadkhah noted.

He went on to say that if the two sides fail to reach agreement, the U.S. will be under tremendous pressure to impose disabling sanctions on the Iranian economy because the alternative is military action.

"The reason is that many in the West as well as many Middle Eastern allies of the United States are convinced that Iran is after developing nuclear weapons. If Iran becomes a nuclear power the turmoil will engulf a strategic region of the world. Many countries including Saudi Arabia, Turkey, and Egypt would feel the necessity of having a nuclear arsenal. Even Russia and its allies will feel something has to be done. Thus, the current negotiations are crucial because the alternatives are dire for Iran and the region," Dadkhah said.

Foreign companies want to return Iran

Following the Geneva deal, several foreign companies expressed readiness to return to Iran. Also, Iranian Oil Minister Bijan Namdar Zanganeh said earlier Iran has begun talks with leading Western energy companies to bring them back to the country, adding France's Total, Royal Dutch Shell, Italy's Eni and Norway's Statoil are among those he is seeking to bring back to Iran's energy sector.

Touching upon this issue, Dadkhah said the Iranian economy in general and the oil sector in particular are desperately in need of foreign investment and technology.

"Several factors are responsible for this urgency. First, over the past 35 years the Iranian oil sector had no significant investment in exploring new fields or maintaining existing fields. As a result, Iran's total oil production has declined by 50 percent," he said.

Dadkhah also added that Iran has not been able to significantly develop its gas resources.

"In the meantime, technologies for oil and gas extraction and for the maintenance of the existing fields have made significant progress. Iran has fallen behind and hasn't had access to these new developments. The only way to access them is through significant foreign investment in the oil and gas sector, which is estimated to need over several hundred billion dollars," Dadkhah said.

"Furthermore, the energy map of the world is changing," Dadkhah said.

"Recently Mexico amended its constitution to allow for foreign investment in oil. The U.S. has tremendously increased its oil and gas production through fracking and shale gas. It is estimated that in the future the U.S. will become a net exporter of oil. Similar developments are going on in Canada, Russia, and Saudi Arabia," he said.

Dadkhah also said Iran has lost its position among the top oil producer countries.

"The country has to act now or pay the price in the coming years," he said.

Reasons behind Iran's economic problems: sanction or mismanagement?

Currently, Iran faces tough economic problems, such as inflation and unemployment. Some people link the problems to the sanctions imposed on Iran by Western countries, however, some others blame mismanagement for the current situation.

Moreover, Iranian President Hassan Rouhani accused the previous administration of mismanagement of blamed it for the aggravation of the economic situation.

Commenting on the issue, Dadkhah said the Iranian economy has suffered from mismanagement over the past 35 years.

"This has been due partly to wrongheaded ideas such as "Islamic Economics," and the need for "self-sufficiency," but also because of rent-seeking individuals and groups. Many people in power have gained considerable wealth by being close to the centers of power and by means of corruption," Dadkhah said.

According to Transparency International's Corruption Perceptions Index, Iran ranks 144 among 175 countries.

Dadkhah said the situation particularly became worse during the presidency of Mahmoud Ahmadinejad, who followed a populist economic policy.

"The results have been high unemployment and 40 percent inflation rate. The sanctions have aggravated the situation by restricting oil exports and preventing Iran from accessing the international financial system," he said.

"Thus, many international transactions have become impossible and those that can be carried out have become costly," he noted.

"If we want to assess the relative impacts of the mismanagement versus sanctions, we should say 70 percent is due to the former and 30 percent to the latter," Dadkhah said.