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Iran Faces New Reality

Jan. 21, 2016

Six world powers on Saturday lifted economic sanctions on Iran after it met the terms of an agreement to restrict its nuclear program. The Middle Eastern nation is now expected to open up to the international community. Will this change the balance of power in the region? How does it affect Japan? First, let's look at the expectations of the Iranian people.

Iranians are hopeful the new environment will reinvigorate the economy. Life under sanctions has been difficult, with inflation at one point hitting 45 percent.

"I am very happy," says one person. "Now, inflation will end and prices will go down."

The World Bank projects Iran's economy will grow nearly 7% in the 2017 fiscal year.

Iranian business people are already eyeing new opportunities, especially in oil-related industries.

i-9 Company, an energy-sector trading firm in the capital Tehran, looks forward to an upturn. It imports control valves for pipelines and other products. The boycott hurt business significantly. The firm's purchasing costs rose six-fold. Sales dropped to half the pre-sanction level.

The company expects its costs to fall and incoming orders to jump as the nation's spending on energy development increases.

"I hope the economy will get out of the doldrums and recover," says company president Vahid Farahamand.

The Pasargad Tours travel agency also looks forward to change. It will train tour guides quickly. It expects more travelers will visit Iran as international relations improve.

Iran is home to 17 UNESCO World Heritage sites -- the most in the Middle East. They include the Persepolis archaeological area that dates back 2500 years.

The agency aims to promote tourism by making the most of the country's rich history. "Our country used to have a scary image under sanctions," says company director Ebrahim Pourfaraj, "But that's no longer the case."


Anchors Sho Beppu and Aki Shibuya are joined by Koichiro Tanaka of the Institute of Energy Economics, Japan.

Beppu: The Iranian people are certainly happy about the lifting of sanctions. But we should note there are still sanctions that have not been lifted yet. How should we put this into context?

Tanaka: We should note there are a lot of concerns over whether Iran is going to honor the deal. Apart from that, we should be mindful there are already sanctions that have been imposed in the past that haven't been lifted yet. They address the ballistic missile program, support for international terrorism and human rights issues. So as long as there are these issues, they could trigger another set of sanctions, if Iran violates these activities. So we have to be very mindful that it's not a done deal yet.

Beppu: Having said that, it is a big change nevertheless. Iran is a regional power. It has a population of 78 million. It has a cultural and traditional influence in the region. So with the country finally opening up, what kind of impact do you think this will have on the region?

Tanaka: So far, we have seen a lot of concern from regional powers such as Saudi Arabia. They've been quite fearful that once the sanctions are lifted, Iran could emerge as a regional power, and that it would be very difficult to contain it, or contain its influence, now that the United States and the West are now talking with and siding with Iran, rather than listening to what Riyadh says regarding Iran's influence and meddling in internal affairs of other countries in the region.

Beppu: It seems that Saudi Arabia is more nervous now.

Tanaka: Yes, we have already seen they have severed their relations with Iran, in the early days of January, and they are also trying to contain or confront Iran by forming a sort of bloc with other Arab countries.

Beppu: Before we talk more, let's move on to look at Japan and Iran. Both countries have enjoyed friendly ties throughout their history. Let's take a look back.


Japan's History with Iran

Japan and Iran have maintained ties for many decades. A certain incident in 1953 is said to have helped bring the two countries closer. At the time, tensions in Iran were running high. The country had been under virtual British rule. In 1951, the government of Muhammad Mussadeq nationalized the country's oil industry.

Britain responded by dispatching warships to the region. A Japanese-flagged tanker heading to Iran successfully passed through a British naval blockade in the Persian Gulf and returned to Japan, as many countries refrained from importing Iranian oil out of concern about harming ties with Britain.

Japan maintained ties with Iran over the years. Following the Islamic Revolution, the pro-US Pahlavi dynasty was overthrown in 1979. Spiritual Leader Ayatollah Khomeini eventually took power.

Later in the year, a group of students seized the US embassy in Tehran. The crisis resulted in Washington cutting diplomatic ties with Iran. Despite Iran's increasingly isolated position, Japan continued to do business with the country -- and remained one of the key importers of Iranian oil.

With the removal of sanctions, Japan hopes to further strengthen its relations with the country.


Shibuya: The history of Japan-Iran relations is not well known. What do you think the Iranian people expect from Japan now?

Tanaka: They are keen to see more investment coming from our country. They need to boost the economy to create more jobs. Apart from that, they will want to see more Japanese products in their market. They speak highly of our Japanese culture, they speak highly of our Japanese technology. These are all positive issues they talk about, and I believe they are quite keen to travel to Japan, to see more of the world.

Beppu: How do you think Japan should respond, how do you think Japanese diplomacy should be regarding Iran?

Tanaka: Now that sanctions are mostly lifted, I think first of all we need to see we don't lag behind Europeans and other states that are pouring into the Iranian market. Politically, or in regional terms, I would advise my government that we need to maintain a dual-track approach -- that is, to keep channels open to Iran as well as to Saudi Arabia. There is a certain amount of tension rising in the region which especially is not good for us or for other Asian states as well. We are totally dependent on the oil coming from the Middle East and the Persian Gulf region.

Beppu: Is Japan regarded as a neutral player from both sides?

Tanaka: I believe so. The problem may be that we may not have that sort of leverage to exert pressure on both sides to come to their senses. Now that there is a certain amount of tension, and I believe that tension will remain for several years, we need to be sure it will not become a sort of a pretext to end up in a war or regional conflict that we've seen in the past. Here, Japan could play a crucial and also rightful role in mediating between the two countries, it shouldn't need to be direct talks, it could be indirect talks, so long as the two countries are not talking face to face.

Beppu: As Iran moves forward, do you think the road is as rosy as some would like to project it. We do know there are elections waiting and the country is entering a very delicate phase of domestic politics. How do you think things will move on?

Tanaka: You're quite right in saying it's very delicate. Iran is facing two elections, both at the same time, on February 26th. One is the parliamentary election; the other is the Assembly of Experts election. The latter will have a role in determining the future leader of the Islamic Republic. If there is going to be a force strong enough to modernize and moderate the debate and also the discussions within the assembly, I believe that Iran could turn more towards the West and the international community and have a positive role.