INTERNATIONAL POLICY ANALYSIS Great Expectations The Iranian Economy after the Nuclear Deal ROUZBEH PARSI December 2016 n The lifting of sanctions has been a major victory for the Rouhani government, but both the government and Iranian society in general are frustrated by the slow in­crease in actual business and economic investment. There is a gap between what can realistically be expected in terms of the extent and speed of foreign investment into a market lagging behind for more than a decade – and the hyped expectations following the JCPOA. n While Iran is on an accelerated path of economic development, major reforms in business practices, state bureaucracy and policies are required to further encourage and enable the foreign direct investment the country needs, for this development to be sustainable. The psychological barrier in the minds of potential investors, caused by restrictions on Iran and problems within the country, needs to be overcome be­fore the risk averse-business sector in Europe will be willing to make serious invest­ments in the Iranian market. n Should foreign partnerships, especially with Europe, fall short of expectations and should the government fail to undertake the necessary domestic reforms, a golden opportunity to improve relations between Iran and Europe and help the Iranian economy to grow in a sustainable fashion will be lost. The domestic ramifications are serious, as the groups within the elite seeking greater engagement with the world will lose ground. If the economy falters, socio-economically vulnerable groups in society will be adversely affected and the economic prospects of the large group of young educated Iranians, the group most inclined to favour engagement with the outside world, will be harmed.