Iran sanctions eased, but pinch still felt

The sanctions relief offered is a meagre amount for the economy of a nation of nearly 80 mnpeople

The sanctions relief offered to Iran by the US and five world powers has begun to get the gears of commerce slowly turning again in an economy that remains in shambles.

The Obama Administration estimates relief from some sanctions in exchange for a temporary pause in Iran's nuclear enrichment program will amount to just USD 7 billion. That's a meagre amount for the economy of a nation of nearly 80 million people it's less than one month's worth of Iran's oil production and just 7 per cent of Iran's overseas cash that remains frozen under the sanctions.

Still, Iranians see the move as a much needed step toward a more normal economy after years of crippling inflation and job losses.

"Markets operate on a psychological basis," says Ray Takeyh, an Iran expert at the Council on Foreign Relations and former US State Department senior adviser. "The psychology of Iranian commerce has changed."

Rahmat Dehghani, a glazier, says he has been invited to discuss a new hotel project in the northeastern city of Mashhad, 900 km east of the capital, Tehran.

"For months, the owner had delayed any discussion about his project since the future was not clear for any investment," he said.

The Iranian economy was already struggling under the weight of corruption, mismanagement and costly food, energy and cash subsides for the poor when the US and Europe broadened economic sanctions against Iran to include its crucial oil and banking sectors in late 2011.

Oil sales plummeted by about 1.5 million barrels per day, depriving Iran of about USD 80 billion since early 2012, according to the White House.

At the same time, much of the revenue Iran did earn from exports to a few Asian countries that were allowed to buy Iranian oil remained out of the country.

The sanctions required oil buyers to pay into locked bank accounts that Iran can access only to purchase non-sanctioned goods or humanitarian supplies.

Manufacturers found it increasingly difficult to buy crucial components to make products or keep factories running. Inflation and unemployment soared and Iran's national currency, the rial, lost more than half its value.