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: The major impediment to the fulfilment of Iran's labour potential is the poor state of the Iranian economy due to international sanctions. This has not only resulted in a dearth of opportunities for skilled and educated workers, but also a lack of employment openings for the many unskilled labourers in Iran. This has resulted in poor labour force participation across all demographics, but particularly for the youth and female population, as well as high levels of emigration. Although the country offers the largest labour pool in the region, and a relatively strong education system, we warn that there is a lack of highly skilled workers and limited workplace experience across the entire labour force. Iran is therefore placed...

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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: Over the longer term, we believe that continued investment by the government to improve infrastructure - such as the improvement of irrigation systems - will help the country turn away from its backward agrarian system and will yield results in terms of better-quality grains. We are especially upbeat in our outlook for grains and sugar production. Recent financial sanctions designed to pressure Tehran over its nuclear programme played havoc with Iran's ability to import goods, making food price inflation soar. The election of President Hassan Rouhani, a more moderate leader...

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Autos

Iran Autos

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Iranian vehicle production rose by 46.7% year-on-year (y-o-y) during 2014, to 1,090,846 units, according to statistics from the International Organization of Motor Vehicle Manufacturers (OICA). Given this strong performance, BMI believes there may be some upside risk to its own forecast of 1,078,492 units produced over the Iranian calendar year period (March 2014 -March 2015). Breaking down the headline figure, Iran produced 925,975 passenger cars and 164,871 commercial vehicles. This makes Iran the 18th largest auto producer in the world.

At the present time, sentiment towards the Iranian auto industry remains dominated by the progress of ongoing negotiations between Iran and the P5+1 countries (the US, Russia, China, France, Britain and Germany) over Iran's nuclear programme. The two sides have until June 30 2015 to reach a permanent agreement. During this time, Iran will continue to receive around USD700mn a...

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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: Homegrown devices have greater potential than international products in Iran, owing to international sanctions that prevent many companies from selling products in the country. We believe the outlook for 2015 will continue to reflect these restrictions although the growing availability of 3G will boost demand for smartphones. Iran's large population offers considerable growth potential and opportunities for companies looking to expand. However, the government's continued interference with internet services and content and its attempt to establish a 'national internet...

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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: The outlook for the Iranian freight sector is positive, as a relaxation of sanctions - expected to be implemented in earnest from the third quarter of 2015 - will see the economy return to positive growth, thereby boosting demand for freight transport services. Fundamentally, the sector will also benefit from a relaxation of sanctions, as many Iranian firms have been directly targeted by restrictions, while foreign companies have been wary of entering the market. The recovery will not be explosive; there remain significant macroeconomic challenges, and the country's infrastructure also needs work - but continued investment and steady economic growth will see volumes across the country's freight transport modes continue to expand over our forecast period to 2019 and beyond.

  • We forecast total road freight volumes will rise by 2.1% year-on-year over 2015 to reach...

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Infrastructure

Iran Infrastructure

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BMI View: The Iranian construction sector stands to benefit from greater international interest, easier access to capital and more demand from the energy sector, should sanctions be lifted. As such, the signing of a framework agreement between Iran and the P5+1 countries on the nuclear issue presents a considerable upside risk to our construction industry forecasts. This framework is seen as the foundation for a final agreement on Iran's nuclear programme, which will see the gradual lifting of international sanctions.

The Islamic Republic remains a country of pronounced risks, including political instability, economic challenges and social tensions, and we believe the current situation is unsustainable in the long term. US energy sanctions and the EU oil embargo have affected Iranian oil production and consequently the economy at large. With...

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Insurance

Iran Insurance

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BMI View: We have revised down our forecasts for the Iranian insurance market as a whole and are now predicting a slight fall across the sector. This is largely attributable to continued western sanctions, which have suppressed wider macroeconomic growth. However, the recent framework nuclear agreement may provide the stimulus for high rates of growth over the second half of the year if financial and oil-related sanctions are lifted, even partially.

The Iranian insurance market is by regional standards developed. Taking into account the relative size of the non-life segment relative 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.The regulator, and...

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Medical Devices

Iran Medical Devices

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BMI Industry View: The Iranian medical device market ranks fifth in the Middle East and Africa (MEA), valued at USD832.5mn. Per capita expenditure, however, is the sixth lowest in the MEA, at USD11. The market looks set to expand at a solid 9.1% CAGR to 2018, but this growth could be affected if relations with the world's leading economies fall through over the country's nuclear enrichment policies.

Headline Industry Forecasts

  • In 2013, Iran's medical device market was estimated to be worth USD832.5mn. However, per capita...

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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

Oil & Gas

Iran Oil & Gas

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BMI View : Despite seeing a small increase in oil production and exports following the Geneva Interim Agreement, a more significant increase can only result from an easing or lifting of international sanctions. In such a situation, a significant ramp-up in production and exports to pre-sanction levels would take three to four years from when sanctions are lifted. Years of underinvestment, maturing oil fields and a lack of field and well maintenance has damaged fields. Gas production will continue to grow, with further development of South Pars phases. Despite strong growth, limited access to capital and technology will still prevent production from accelerating sufficiently to meet demand....

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Petrochemicals

Iran Petrochemicals

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BMI View: The future of the Iranian petrochemicals industry is brightening, with prospects of a lifting of sanctions. We note, however, that the country will be unable to ramp up production and attract investment in the long term unless talks over its nuclear programme result in a breakthrough.

If Western sanctions are lifted, Iran's petrochemicals capacity is expected to reach 100mn tonnes per annum (tpa) by 2020. Until now, the industry's capacity utilisation levels have been low due to a collapse in exports; and many projects are half-completed and in dire need foreign investment. At the same time, domestic consumption has been hard hit by the country's isolation. As a result, while the prospect of a lifting of sanctions will improve the outlook for the country's petrochemicals industry, it will be a long road to full recovery.

...

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Pharmaceuticals & Healthcare

Iran Pharmaceuticals & Healthcare

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BMI View: BMI continues to adjust its forecasts for Iran's pharmaceutical market to account for the sanction-induced currency crisis and high rates of inflation. Despite not specifically targeting medicines, sanctions against Iran had dire consequences for the pharmaceutical sector, with drug shortages becoming commonplace. The domestic industry has since enhanced its manufacturing capabilities and is becoming increasingly sufficient in the production of medicines, reducing its reliance on importing from foreign multinationals. We believe the government views the healthcare sector as a priority and expect the industry to remain relatively unaffected by lower oil prices.

Headline Expenditure Projections

  • ...

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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.

Iran will continue to rely largely on conventional thermal sources for electricity generation, with many of the power projects that are currently under construction slated to increase the nation's natural gas generation capacity. At the same time, the government appears committed to plans...

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Shipping

Iran Shipping

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The outlook for the Iranian shipping sector is brighter than it has been in recent years, and we forecast a second consecutive year of growth at the primary container port of Bandar Abbas in 2015. The ongoing easing of sanctions - not least on the port operator itself - will boost throughput. We expect a significant easing of sanctions following a likely agreement in summer 2015. However, we note risk to our projections from the volatile price of oil in recent quarters. The general trend is that Brent crude will average considerably less than in recent years - we forecast and average of USD53 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.

That said, the removal of port operator Tidewater from sanctions in late 2014 will provide a fundamental boost to the facility as any 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, which is limiting access to the latest devices. However, the Iranian government is making headway in the process of lifting the sanctions and is adding upside to our outlook. BMI 's Country Risk team has made a slight upward revision to our economic growth forecast for Iran, in anticipation of a deal with the West in July 2015, 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 impact on the mobile market and potentially attract more foreign investment. Although the mobile penetration in Iran is relatively high at 136.1%,...

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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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