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 will reach an agreement with the P5+1 countries over the former's nuclear programme. This will result in a gradual unwinding of sanctions on Iran.

  • Declining oil prices will force the government to cut current spending and investment in the country's infrastructure sector in 2015, 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....

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Iran Operational Risk Coverage (9)

Iran Operational Risk

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BMI View: 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 49.1 out of 100 ranking the country 13th out of 19 states in the MENA region. However, there is potential for improvement in this score, as Iran's transport network is adequate for...

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Iran Crime & Security

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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...

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Iran Labour Market

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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...

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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...

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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...

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Iran Industry Coverage (18)

Agribusiness

Iran Agribusiness

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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...

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Autos

Iran Autos

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Our view that the P5+1 nations (Russia, China, the US, the UK, France plus Germany) will reach a permanent deal with Iran regarding its nuclear programme by June 30 is hugely positive for the recovery and future development of the autos sector ( see 'Nuclear Deal To Be Reached In June', March 24). Access to kits and components from foreign partners means that we now expect to see total vehicle production increase 27.8% in 2015, led by 30.0% growth in the production of passenger cars. At 1.394mn units, this would still leave output short of its 2011 high of 1.648mn, but we expect output to ramp up to over 2mn units by the end of our forecast period in 2019, based on the anticipated projects by carmakers waiting to invest in the sector.

These new projects in the local assembly industry, plus the freedom to export fully built vehicles to Iran means we also have a more upbeat forecast for sales growth of 35....

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Commercial Banking

Iran Commercial Banking

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

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Consumer Electronics

Iran Consumer Electronics

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BMI View: We revised the outlook for Iran's consumer electronics market in the Q415 update to reflect the increased growth potential as the easing of sanctions crystallised following the nuclear deal in July 2015. We also revised historical data for Iran, and now estimate the market was smaller than under our previous forecast by benchmarking spending given the lack of accurate data available for the domestic market. 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,...

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Defence & Security

Iran Defence & Security

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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 ...

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Freight Transport

Iran Freight Transport

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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 2019, across all freight modes.

  • We forecast total road freight volumes will rise by 0.8% in 2015 to reach 109mn tonnes. Growth will be 2.8% in 2016.

  • We forecast total rail freight volumes will rise by 0.3% in 2015 to reach 33.03mn tonnes. Growth will be 1.5% in 2016....

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Infrastructure

Iran Infrastructure

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BMI View: We have upwardly revised our construction industry forecasts for Iran on the back of the agreement reached with the P5+1 countries and the announcement that sanctions will be lifted faster than expected. Structural weaknesses in the Iranian economy - particularly the lack of competitiveness in the labour market - will present the main risks to investors willing to return to this market.

Key Trends And Developments

  • We forecast 1.4% y-o-y real construction industry growth in Iran in 2015 and an average of 4.3% over the next five years as a result of the lifting of international sanctions.

  • ...

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Insurance

Iran Insurance

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BMI View: Over 2015 we anticipate that the Iranian insurance sector as a whole will contract by nearly 15% in part due to a weak economic forecast. This is largely down to continued uncertainty over Iran's rapprochement with the West and low oil prices. Over the rest of the forecast period growth should pick up as the economy as a whole improves. Growth is likely to be largely driven by basic, compulsory lines including motor and health.

As with many regional markets the non-life segment is relatively large compared to its life counterpart; it will remain the key source of growth for the sector as a whole. Compulsory motorists' third party insurance (CMPTL) and health insurance remain by far the dominant lines. These will constitute the greatest driving forces behind the increase in premiums over 2015. Motor insurance will be driven...

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Medical Devices

Iran Medical Devices

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BMI Industry View: 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 the growth of imports will likely be tempered by lower oil prices.

Headline Industry Forecasts

  • In 2013, Iran's medical device market was estimated to be worth USD832.5mn. However, per capita expenditure is very low, at USD11. The market is projected to grow by a relatively moderate CAGR of 9.1% in US dollar terms, taking the market to USD1,284.3mn by 2018. Per capita spending is not expected to rise strongly over the same period.

  • ...

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Metals

Iran Metals

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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...

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Mining

Iran Mining

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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...

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Oil & Gas

Iran Oil & Gas

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BMI View: The alleviation of sanctions has the potential to significantly turn around Iran's energy sector, given the size of undeveloped oil and gas reserves and opportunities in the downstream sector. Nevertheless, this will require time and significant amounts of capital. New contract negotiations and terms on offer will be a crucial determinant in gauging demand and participation by foreign oil companies.

Headline Forecasts (Iran 2013-2019)
2013 2014e ...

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Petrochemicals

Iran Petrochemicals

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The Iranian petrochemicals industry will reap the rewards of sanctions relief under the P5+1 agreement signed in July, but structural problems will persist until feedstock issues are resolved and the industry opens up to investment and the technology transfer that comes with it. Nevertheless, if the agreement holds, the prospects for strong exports-led growth are good as the government aims to raise capacity from the current 60mn tonnes per annum (tpa) to 100mn tpa by 2020.

Sanctions have had a deleterious impact on the Iranian petrochemicals industry due to the collapse of the domestic economy, the lack of investment and the difficulties in exporting output. Iranian petrochemicals producers were directly targeted by sanctions. The relief of sanctions should raise the operating rates from 68% of capacity, as they were in 2014, even as capacity grows. In 2015/16, Iran plans to open 11 petrochemical units, increasing the country's...

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Pharmaceuticals & Healthcare

Iran Pharmaceuticals & Healthcare

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BMI View: The gradual easing of sanctions in Iran will lead to an uptick in interest from multinational pharmaceutical companies, many of which chose not to do business in Iran during this time. The supply of high value patented medicines will still be satisfied by multinationals despite increasing competition from domestic companies, with the easing of sanctions providing a more attractive operating environment.

Headline Expenditure Projections

  • Pharmaceuticals: IRR60,704bn (USD2.35bn) in 2014 to IRR68,851bn (USD1.91bn) in 2015; +13.4% in local currency terms and -18.6% in US dollar terms. Forecast unchanged from previous quarter.

  • Healthcare: IRR694,087bn (USD21.83bn) in 2014 to IRR791,...

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Power

Iran Power

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BMI View: Iran's plans to expand its energy sector continue to be hampered by ongoing uncertainty over the outcome of international talks to loosen sanctions on the country. It appears clear that the government intends to press ahead with the construction of nuclear power stations, but perilous government finances could threaten its ability to fund new power infrastructure projects. That said, if a deal is reached and Tehran continues investing in the sector, there is significant potential for rapid growth in the years ahead.

Despite ongoing controversy over the country's pursuit of nuclear power, the Iranian energy sector is in reasonably good shape. With abundant supplies of natural resources, Iran will continue to rely largely on conventional thermal sources for electricity generation for the foreseeable...

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Shipping

Iran Shipping

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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 consumer goods.

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Telecommunications

Iran Telecommunications

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BMI View: Iran's telecoms market is an underperformer in the Middle East as a result of political and economic risks, exacerbated by currency depreciation. Access to the latest devices is limited. The UN Security Council's unanimous vote in July 2015 to lift the sanctions against Iran, following a deal on Iran's nuclear programme, however, warrants an optimistic outlook. BMI's Country Risk team has made a slight upward revision to our economic growth forecast for Iran, projecting real GDP growth to pick up from 0.6% in 2015, to 2.9% in 2016 and 3.6% in 2017. This is also likely to have a positive effect on the mobile market and potentially attract more foreign investment. Although mobile penetration in Iran is relatively high at 136.1%, BMI believes that there is further scope for growth. Data services, in particular, will grow at an average rate of 36.2% CAGR...

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Water

Iran Water

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BMI View: Long-term increases Iran's water usage along with dwindling supplies have plunged the country into a critical water shortage. Conserving water is an issue that has been long-neglected by the government in favour of dam building but the worsening drought has forced the government into action. While updating infrastructure and increasing water treatment and reuse have recently begun to improve the sector the deeper issue is the overuse of water, in households, industry and agriculture. The government's plans to alleviate the problem include buying water from elsewhere, restricting consumption, resuscitating lakes and educating the Iranian people about the importance of conserving water.

The recent increase...

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