EconVue Spotlight: Focus on Iran
posted by Lyric Hughes Hale on July 25, 2017 - 9:47am
There are two major epicenters which have the ability to create either wider prosperity in their region, or global economic fault lines. The first is China, which is the only major developing market not to experience a recent financial crisis, and the second is Iran. Iran is as big as all of Western Europe, and three times larger than Iraq. It is the second largest economy in the Middle East and the second largest supplier of natural gas after Russia. Both are countries I have studied for decades, but now I am particularly concerned about a possible change in direction in US-Iran policy. I might need to update an article I wrote more than five years ago, "The Coming Accidental War with Iran".
Last week I participated in a teleconference with Iran's Foreign Affairs Minister Mohammed Javad Zarif at the Council on Foreign Relations in New York. Zarif seemed disappointed by the pace of international business activity after the nuclear deal was signed with the US in 2015. He put this down to the expectation of further sanctions and uncertainties surrounding the US administration. After Iran's election in May, there are positive signs of reforms meant to attract global investors, which include new taxation legislation, as EconVue expert Narimon Safavi writes in his article on Iran's changing economy.
All this might be in vain. The JCPOA between the US, Iran, the EU and five other countries was a signal achievement of the Obama Administration. To understand what was involved from an insider perspective, I highly recommend Trita Parsi’s new book, “Losing an Enemy” coming out on August 1st. Given recent events, Obamacare could outlast the Iran nuclear deal. We'll see what happens in Washington this week.
Ironically, the structure of the deal might contain the seeds of its destruction. The framework of the JCPOA requires certification by the US every ninety days. Although President Trump signed recertification last week, Foreign Policy broke a story on Friday that claims he has asked a White House team to make sure this doesn’t happen again. China, even at the height of trade tensions with the US, had to fight its Most Favored Nation battle only once a year.
Next week's edition will focus on India, as well as the increasingly tense India-China relationship.
STORIES IN OUR SPOTLIGHT
Iran
Is the Nuclear Deal with Iran Slipping Away?
Robin Wright 7/19/2017 New Yorker
A Conversation with Mohammad Javad Zarif
Council on Foreign Relations 7/17/2017 Video
Video of the discussion I attended via teleconference. Zarif joked that he has spent more time with (then Sec’y of State) John Kerry than any other human being.
Total’s Iran Deal Gives Rouhani Space to Push Reform
Dr Sanam Vakil and Dr Neil Quilliam 7/5/2017 Chatham House
The time is now for European governments and international companies to ignore distractions from Washington and the Gulf countries and encourage economic reform in Tehran. The French oil company Total has decided to move forward.
Rouhani Tries to Get Iranians to Pay Their Taxes
The Guardian 2/5/2015
Repairing the Islamic Republic’s broken tax system becomes a priority as oil revenues continue to fall.
US-Debate of the Week
On the prospects for higher economic growth
John F. Cogan, R. Glenn Hubbard, John B. Taylor and Kevin Warsh 7/18/2017 AEI
At least two of the authors are in the running for Fed Chair next year. Trump will likely appoint six Fed governors in the next twelve months.
Trump’s budget assumes 3 percent annual growth. Why that’s extremely unlikely, explained
Jason Furman 5/24/2017 Vox
I agree with Furman. Policy based on 3% growth that misses its target is riskier than one based on 2% that overshoots. Headwinds are still strong.
China
China’s economic growth is driven by all the things it says it wants to get rid of
Zheping Huang 7/16/2017 Quartz
How the One-Child Policy Heightens China’s Aging Crisis
Zhang Wenli and Yu Yan 7/17/2017 the Sixth Tone
If China can develop a good elderly care system, that will be the only hope for those born in the '80s-‘90s
Portugal's bond with China: pioneering debt sale founded on close ties
John Geddie and Dhara Ranasinghe 7/3/2017 Flipboard
Watch Portugal. The EU's second worst performing banking sector, NPLs at 20%.
The Doklam Standoff Is The Beginning of a Troubling New Era in India-China Ties
Gaurav Kalwani 7/20/2017 the Diplomat
Challenging times lie ahead for India. While the conflict at Doklam continues with no clear end in sight, none of the possible outcomes will immediately solve India’s China problem, its Siliguri problem, or its Northeast problem. Longer term, however, through a proactive approach to Northeast policy, India could eventually kill three birds with one stone.
ECONVUE RESEARCH
Update on Iran's Political Economy: Will Taxes Replace Oil Revenues?
Narimon Safavi
While the rest of the world is preoccupied with the now familiar crises in the MENA region (refugees, the Syrian civil war, Yemen) the newly reelected president of Iran appears to be making determined moves to shift Iran’s economy from dependence upon energy resources to reliance on taxation revenues.
While recent data has abated concerns about the Chinese economy, the strength of the yuan is mostly a reflection of US dollar weakness, as well as the restrictions on capital accounts. While central bank actions have contributed to stabilize the currency, in the long-term they run counter to the goal of yuan internationalization.
The Bumpier Road to a 'Trump Bump' in Fiscal Policy
Michael Lewis (Subscription content)
While the Republican bid to “repeal and replace” the Affordable Care Act may be done for the year, reports of the demise of the rest of the Trump agenda are greatly exaggerated. The White House still has a good chance to achieve meaningful tax reform this year as well as some spending cuts. Trump has made tangible progress in relieving the burdens of federal regulation on the economy and rates to generate substantial further relief.
Still at the starting gate is Trump’s ballyhooed infrastructure program. The White House has issued few details and no timetable yet for the potential trillion-dollar effort. However, given that this may be the only Trump initiative that can get Democrat votes in Congress, odds are good that Trump will deliver something.
The Dominican Republic: Security challenges, government responses and recommendations for the U.S.
R. Evan Ellis
The strong U.S. interest in the success of the Dominican Republic is complemented by the deep-rooted positive orientation of the Dominican Republic—at both the state and popular level—toward the United States. As a result, the U.S. continues to have in the Dominican Republic a highly receptive and cooperative partner to pursue initiatives in security cooperation and other areas.
