Iran has the world's fourth largest proven oil reserves, and the world's second largest proven gas reserves after Russia. Iran is also rich in other resources aside from oil and gas, and has a strong agricultural sector. The country’s Revolutionary Guard and Basij militia are fiercely loyal to the supreme leader, helping to maintain social stability.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 18 of Iran’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Iran.

Country Risk

Iran Country Risk

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Core Views

  • Iran's agreement with the P5+1 countries over the former's nuclear programme will result in a removal of almost all sanctions on Iran in Q116.

  • Declining oil prices will force the government to cut current spending and investment in the country's infrastructure sector in 2016, which will result in slow expansion of private consumption and fixed investment.

  • Downside pressure on the Iranian rial will remain prominent, and the unit will remain sensitive to developments in nuclear negotiations over the coming quarters.

Major Forecast Changes

  • We have revised our real GDP growth forecasts this quarter, and are projecting the economy to expand by 1.0% in 2015 and 4.0% in 2016, respectively, from 2.1% and 3.0% previously....

Iran Operational Risk Coverage (9)

Iran Operational Risk

BMI View:

BMI View: Iran is on the cusp of a historic rapprochement with the West which will, over time, result in the normalisation of international relations, alleviation of sanctions on the economy, and opportunities for foreign involvement in the country's vast hydrocarbons sector and consumer market. However, while the lifting of the sanctions regime will lead to a gradual improvement in the operating environment, the long-term survival of the nuclear agreement reached in July 2015 is not guaranteed, and many barriers will continue to stand in the way of greater foreign direct investment (FDI). These include obstacles to trade and regulatory restrictions on FDI, onerous taxes, stringent labour laws, the potential for terrorist activity, and widespread corruption. Until structural reforms to the business environment take place, Iran will continue to offer a high risk location for investment. The country scores below the...

Iran Crime & Security

BMI View:

Iran's continuing pursuit of a nuclear programme in spite of international condemnation and sanctions has made it one of the most ostracised states in the world. The country experiences largely unfriendly relations with most other nations, and its vulnerability has increased since June 2014 with the rising threat of the Islamic State of Iraq and the Levant (ISIS) in neighbouring Iraq and Syria. Iran's overall score is highly depressed by these interstate security risks. However, due to its strong policing capabilities and relatively low levels of organised crime across the country, the risk of criminal activity affecting foreign workers and businesses remains low. Iran has therefore been awarded an overall score of 41.7 out of 100 in the BMI Crime and Security Risk Index. This score is the highest of Iran's neighbouring nations, and places the country in joint eighth position out of 18 Middle East and Africa (MENA) states, along with its...

Iran Labour Market

BMI View:

The major impediment to the fulfilment of Iran's labour potential is the poor state of the Iranian economy through international sanctions. Not only does this represent a dearth of opportunities for skilled and educated workers, but also a lack of employment opportunities for the many unskilled labourers in Iran. Iran scores 47.3 out of 100 for its Labour Market Risks, placing it in ninth position out of 18 countries in the Middle East and North Africa (MENA) region.

In terms of the size of Iran's labour force, the country has a burgeoning youthful population. While this is often a boon in developed economies, in Iran it is placing unprecedented stress upon the job markets as there are too few opportunities being vacated by elder members of the workforce to provide employment for the many young members entering Iran's labour force. These young workers also often have a higher level of literacy and education than their older compatriots due to...

Iran Logistics

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Iran is a logistics underperformer within the Middle East and North Africa (MENA) region. All aspects of the country's economy and trade have suffered due to international sanctions. Furthermore, high levels of bureaucracy provide an additional barrier to trading from the country, and the utilities infrastructure is struggling to meet demand. Iran therefore scores poorly overall in the BMI Logistics Risks Index, with 46.4 out of 100 ranking the country 13th out of 18 states in the MENA region. However, there is potential for improvement in this score, as Iran's transport network is adequate for meeting its supply chain needs, and the country is well positioned to develop a role as a transit point for trade between the Middle East and Asia. In addition, the lifting of sanctions, which began in 2013, will gradually start to create opportunities for investors in this large and underdeveloped market.

The growth of Iran's...

Iran Trade & Investment

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There are significant risks to potential investors considering entering Iran with regards to the imposition of international restrictions and sanctions by many countries, particularly in the developed world, hampering both external capacity for trade and investment, but also hindering Iran's access to financial markets and trading mechanisms internationally. Iran has been awarded a score of 28.1 out of 100 for its Trade and Investment Risk. This places it in fourth lowest position regionally out of 18 countries.

This is particularly prevalent in terms of Economic Openness, for which Iran is awarded a score of 21.9. In this section, the main risk is of international sanctions limiting the ease and ability of trading with or investing in Iran. Though Iran possesses around 7% of the world's natural reserves including 10% of the global proven oil reserves and 16% of the world's natural gas reserves, this wealth is difficult to invest in due to...

Iran Industry Coverage (18)

Agribusiness

Iran Agribusiness

BMI View:

BMI View: The landmark Iranian nuclear agreement of July 2015 paves the way for the return to growth of the Iranian economy and for a strong uptick in foreign investment. Consumer demand, including for agricultural products, will be a strong beneficiary. The increased supply of inputs and potential investment in capacity and infrastructure will improve the outlook for agricultural production growth in the country. However, such a development will depend on the country doing some key modernisation investment, particularly in irrigation, as Iran relies heavily on the vagaries of the weather. Therefore, production expansion will be slower than consumption growth in the coming years and Iran will remain a large and growing importer of key commodities.

Agribusiness Market Value
BMI Market...

Autos

Iran Autos

BMI View:

BMI View: The autos sector will be one of the biggest beneficiaries of the lifting of sanctions in 2016, as the consumer base has shown its preference for Western brands. The improved outlook for infrastructure project financing is also supportive for the commercial vehicle segment.

Passenger Car and Light Commercial Vehicle Sales
(2013-2019)
National Sources/BMI

Key Views

  • Western brands will be well received post-sanctions, given the backlash against domestic carmakers...

Commercial Banking

Iran Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Consumer Electronics

Iran Consumer Electronics

BMI View:

BMI View: We made revisions for the Iran consumer electronics market in our Q415 report to better reflect the growth potential and historical data in the market. Following the nuclear deal in July 2015, we have also revised the potential for future prospects. Under our revised outlook we expect consumer electronics spending growth to accelerate from 2016 as the easing of sanctions makes a positive contribution through increased supply of devices and formalisation of retail, which will drive down prices and catalyse volume growth, enabling vendors to tap into positive fundamentals including population and income growth. We do, however, continue to stress downside risk and uncertainty surrounding the outlook for Iran, including political and operational risk and the challenging economic environment.

...

Defence & Security

Iran Defence & Security

BMI View:

BMI View: We expect Iran to reach a nuclear deal with the P5+1 powers in 2015, leading to a lifting of sanctions over coming quarters. This will facilitate a return to economic growth; however, progress will slow, and Tehran's military spending will therefore remain modest on a regional comparison in the short-term. That said, demand for defence equipment will be strong, as Iran continues to provide assistance to Shi'a groups across the region; seeks to narrow the gap to rival Saudi Arabia's more technologically advanced military; and invests in weapons systems to protect against a potential US/Israeli attack. Meanwhile, the government remains ...

Freight Transport

Iran Freight Transport

BMI View:

BMI View: An agreement was reached between Iran and the P5+1 powers in Vienna in July which should see all sanctions against the Middle Eastern country removed in 2016. This is highly positive news for the freight transport sector in Iran, in particular the shipping sector and the country's pipelines, as it will resume oil exports in full. With regards the rest of the freight transport mix, growth will be slow initially as the economy will take some time to recover. Nevertheless, growth will accelerate over the course of our medium-term forecast period to 2020, across all freight modes.

We forecast that total Iranian trade will see a return to real growth in 2016, following four consecutive years of decline from 2012 to 2015, as the effect of sanctions removal takes hold. The removal of almost all sanctions on Iran's economy - which we expect to occur in H116 - will cause a...

Infrastructure

Iran Infrastructure

BMI View:

BMI View: We maintain our construction industry growth forecast for Iran at 3.2% real growth in 2016 as we expect international sanctions to be lifted from H116. This will result in the gradual return of private investment in the country, which will considerably benefit the infrastructure sector. Although we anticipate investment opportunities across all sectors, railway projects will attract considerable investment.

Latest Updates And Structural Trends

  • We forecast 3.2% y-o-y real construction industry growth in Iran in 2016 and an average of 4% over the next five years as a result of the lifting of international sanctions.

  • Persistently low oil prices - our Oil & Gas Team forecasts Brent to average USD54.0/bbl in 2016 - will reduce government revenue,...

Insurance

Iran Insurance

BMI View:

BMI View: While still at an early stage, Iran's growing rapprochement with the international community is likely to lead to increasing opportunities for overseas insurers and investors over the coming years. Although the Iranian insurance market is relatively developed by regional standards, there is still significant potential for growth, especially in the life segment and most non-compulsory non-life lines. The lifting of trade sanctions should spur the growth of the economy which will lead to significant growth in income levels. Foreign firms will be looking to target these high-income households while also for looking for opportunities in other areas of the economy, not least the country's sizeable energy sector.

...
Headline Insurance Forecasts (Iran 2013-2020)

Medical Devices

Iran Medical Devices

BMI View:

BMI View: Iran will remain an attractive market in the region due to its large size, but it will register low growth in US dollar terms, due to the depreciation of the rial. With a deal over the country's nuclear activity reached in July 2015, the easing of international sanctions should see a rise in imported medical devices into Iran over the coming months. We do not expect a sharp rise, however, as import growth will likely be tempered by lower oil prices and the country's lack of investment over the past decade.

Projected Medical Device Market, 2014-2019
Total (USDmn) ...

Metals

Iran Metals

BMI View:

The outlook for Iran's metals sector is improving for the first time years as sanctions begin to be eased following negotiations with the Western powers. On the whole, however, we are far from sanguine given our bearish outlook for steel prices and the fact that any rapprochement with the West, if indeed it happens, will be drawn out and not have a significant impact in the near term. We note with scepticism, Iran's plans to increase its steel capacity from 20mn tonnes per annum (mntpa) to 55mntpa by 2025, as well as a tripling of aluminium smelter capacity to 1.5mntpa.

While a cut in external trade has impacted negatively on the steel industry, isolation has ensured that imports have also been restricted. However, domestic industrial deficiencies in certain market segments mean that Iran will struggle to meet its own needs in spite of declining consumption. Crude steel output rose 11.1% year-on-year (y-o-y) to 13.27mn tonnes in the first 11...

Mining

Iran Mining

BMI View:

BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years, especially given easing sanctions on Iran. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for sanctions to be eased from Q116 which will have be a game changer for the country's beleaguered mining industry...

Oil & Gas

Iran Oil & Gas

BMI View:

BMI View: Regardless of the expected removal of sanctions, gas production and consumption will see a substantial ramp-up in 2016. The lifting of sanctions in early 2016 will allow for around 600,000b/d of new oil exports by the end of 2016. New refining capacity will eradicate net fuels imports from 2016.

Headline Forecasts (Iran 2013-2019)
2013e 2014e 2015f 2016f ...

Petrochemicals

Iran Petrochemicals

BMI View:

Iran is set to ramp up petrochemicals exports following the ending of international sanctions in January. The effects are likely to be global with a large amount of basic chemicals entering the market, leading to downward pressure on prices. However, the country still faces an uphill struggle with inward investment due to infrastructural and regulatory hurdles and will remain behind its Arabian Gulf competitors.

The country's petrochemicals production capacity was around 60mn tonnes per annum (tpa) in 2015, but the shortage of natural gas as feedstock, ageing production units and the problem of sanctions, which reduced exports, have caused petrochemical complexes to work at lower capacities. Iran's petrochemical output grew 10% year-on-year to 44.4mn tonnes in FY2014/15, implying capacity utilisation of 74%. Iran also increased petrochemical production by up to 2mn tonnes to about 46mn tonnes in 2015, but mostly by increasing...

Pharmaceuticals & Healthcare

Iran Pharmaceuticals & Healthcare

BMI View:

BMI View: In light of easing economic sanctions, international drugmakers - both R&D-based and generic drug firms - will seek to gain a local presence in Iran's pharmaceutical market. Import restrictions mean supply opportunities will be very problematic for generic drugmakers without a local presence. The supply of patented drugs will be easier for multinationals, although a local presence will be the ideal scenario for most drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: IRR60.70tn (USD2.35bn) in 2014 to IRR69.55trn (USD1.93bn) in 2015; +14.6% in local currency terms and -17.8% in US dollar terms. Forecast unchanged from p...

Power

Iran Power

BMI View:

The signing of the Joint Comprehensive Plan of Action between the Iranian government and the PG+1, comprised of the five permanent members of the Security Council and Germany, an agreement aimed at bringing an end to sanctions on Iran through agreement on the country's nuclear programme, has precipitated considerable activity among foreign investors looking to take advantage of the country's considerable market for electricity, both in terms of domestic supply and export.

Since the signing of the agreement, several companies, many of them European, and several government delegations have visited Iran, signing agreements with the government aimed at installing a number of new power plants in the country.

BMI forecasts Iran's total power generation to be 258.11TWh in 2016, an increase of 1.55% on 2015's 254.17TWh. Between 2017 and 2024, BMI...

Shipping

Iran Shipping

BMI View:

BMI View: The historic deal agreed between Iran and the P5+1 powers in Vienna on July 14 - assuming it passes through parliaments - will see growth return to the Iranian economy and its shipping sector over the coming years. This recovery will not be immediate and there remain significant challenges to growth in the near term. The general trend is that Brent crude will average considerably less than in recent years - we forecast an average of USD59 per barrel in 2015 - meaning that the economic boost from easing sanctions will be limited. Iranian consumers will continue to be under pressure, and a massive ramp up in containerised goods imports is unlikely. However, as real GDP growth in the country picks up, we expect pent-up demand from the growing middle class in the Middle East's largest population to drive growth in imports of containerised...

Telecommunications

Iran Telecommunications

BMI View:

BMI View: Following years of underperformance due to limited foreign investment and lack of advanced mobile data services, the launch of 3G/4G service by the Iran's two leading mobile operators has offered a major boost to subscriptions and value growth. This positive trajectory will be sustained over the coming years, as the expected lifting of sanctions from 2016 and allocation of new licences attract increased investment to the market. Iran's strict censorship of the Internet and the large number of inactive SIMs on operators' networks pose the main downside risks to our growth outlook.

3G/4G Opens Opportunities For Data-Centric Services
Iran Mobile Market Forecast
...

Water

Iran Water

BMI View:

BMI View: Iran is continuing to extract increasing amounts of water each year. This is largely due to population growth, however, drought concerns and water scarcity make this consumption rate unsustainable, in our opinion. One of the largest consumers of water is the agricultural sector, where very heavily water-dependent crops continue to be grown. The government has recently announced it will be putting limits on this usage and has also changed its stance from very strongly promoting the building of dams to supporting the development of a better wastewater network. The reuse of wastewater, especially in industry and agriculture, could go a long way in aiding the water shortage.

We view the Iranian water sector as one of the least appealing with regards to...

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