With sanction relief from the US, and those from the EU likely to be reduced by late 2013/early 2014, trade will become easier and consumer spending is predicted to rebound.
The news has been cautiously welcomed by cosmetics traders in the region, who also emphasize that economic changes are not likely to occur overnight.
Comments from a Euromonitor analyst suggest the improved relationship between Iran and the West, combined with the anticipated relaxing of sanctions, is likely to make it far easier to transfer money to and from Iran, thus greatly improving trade.
They also suggest that sanctions caused unit prices for cosmetics to surge due to the lack of US$ on the market, and that relaxing these regulations will lead to unit prices reducing thanks to the new exchange rate.The analyst notes that sanctions over the last four years have seriously damaged the Iranian economy, leaving luxury items like cosmetics out of reach for most consumers.
According to Euromonitor, this has led to an increase in smuggling: when Procter & Gamble pulled out of the country, the gap in the market left by its Gillette and Razor brands was almost instantly filled by illicit goods.
A ‘smoother business relationship’
An Iranian cosmetics trader named Reza quoted in Reuters, commented that the new deal is a positive step, which may result in stronger trading between the West and Iran in the future.
He said: “we’re hoping that the tension between Iran and the West will be reduced, and that will result in a smoother business relationship because business has dropped dramatically in the last two years.”
Iran’s booming cosmetic trade
According to a Euromonitor figures, the total value of sales in Iran will exceed $4.6bn by 2015. Although make-up is officially forbidden by the government, Iran was nevertheless the second-biggest cosmetics market in the Middle East in 2012, after Saudi Arabia.
Speaking to Cosmetics Design Europe, the analyst attributed the growth in spending to an increase in average income related to oil prices, which suggests that the corresponding improvement in the economy which may follow the relaxation of sanctions will also boost spending.