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

  • Recent improvements in relations with the West bode well for the country's economy. That said, uncertainty over the outcome of negotiations over Iran's nuclear programme will ensure that risks to the outlook remain elevated.

  • 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 1.4% in 2015 and 2...

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Iran Operational Risk Coverage (9)

Iran Operational Risk

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BMI View: Iran has the potential to offer an attractive investment opportunity due to its sizeable population, trade aspirations and natural resource wealth, but it is severely limited by international restrictions and sanctions that constrain the potential for external involvement and economic growth. In addition, Iran's pervasive bureaucracy and limited technologies and infrastructures contribute significant risks in terms of costs and delays for potential commercial ventures in the country.

Overall, Iran is a significantly unattractive country for investors, with many substantial operational risks. We see the major risk as being the imposition of international sanctions hampering the flow of goods, technologies and finances from Iran to external locations, and vice versa. In addition, these sanctions have contributed to Iran's high levels of unemployment, which can reach up to 28% in urban...

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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...

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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 the continued investment by the government to improve infrastructure - such as the improvement of irrigation systems - will help the country to 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, leaving ood price inflation is soaring. The election of President Hassan Rouhani, a more moderate leader than his predecessor Mahmoud...

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Autos

Iran Autos

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The main political news affecting the Iranian auto industry over the past quarter was the announcement on November 24 2014 that there has been an extension to the deadline for a 'permanent' agreement to be reached on the Islamic Republic's nuclear programme- which aims to ensure that Iran cannot use its enrichment activities to produce a nuclear weapon before the West can intervene - until June 30 2015. During this extension period to the ongoing talks between Iran and the P5+1 countries (the US, Russia, China, France, Britain and Germany), Iran will continue to receive approximately USD700mn per month from its frozen accounts, although key international sanctions on its energy and banking sector will remain in place.

BMI's Country Risk team believes that the talks will be protracted, with risks tilted slightly to the downside. Overall, we believe that a solution to the nuclear issue will not be found by June 30, as...

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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: Home-grown 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 '...

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Defence & Security

Iran Defence & Security

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BMI View: The significant 17.5% year-on-year (y-o-y) increase in defence spending for 2015 is due to an increase in the value of the local currency. A second extension to the interim deal on the nuclear program in November 2013 seems the best outcome if the parties fail to reach a deal within the context of the P5+1 talks by the November 24 deadline. A short term non-admitted tactical cooperation to combat the Islamic State (IS) between Iran and the West is possible, long-term cooperation is questionable.

Iran's annual defence budget is modest in comparison with that of its neighbours Israel, Saudi Arabia, and Iraq. Details of the defence budget are only summarily divulged to public scrutiny if at all. For 2015, our forecasts estimate defence spending to reach USD11.6bn, which fades in comparison with the USD59.5bn forecast for Saudi Arabia. We...

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Freight Transport

Iran Freight Transport

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BMI View: The outlook for the Iranian freight transport sector has changed somewhat since our last quarterly update - at least in the short term. The fall in global oil prices through the end of 2014 has caused us to revisit many of our macroeconomic assumptions for net oil exporters, Iran included, and resulted in a downgrade to many of our previous forecasts. The long-term picture is still fairly positive - Iran has a large and growing population, and there is considerable investment being made into all freight modes - but the challenges to short-term growth are salient. Nevertheless, we forecast a positive expansion in volumes through rail, air and ports in 2015 and over the medium term.

Headline Industry Data

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Infrastructure

Iran Infrastructure

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BMI View: We have downgraded our construction industry forecast for Iran in 2015 to 1.6% real growth, from a previous 2.8%, on account of falling oil prices. Reduced government revenue will further limit public investment in infrastructure and Iran's weak business environment will continue to discourage private investment.

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 the oil and gas industry accounting for an estimated 70% of the country's total exports, the government has been...

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Insurance

Iran Insurance

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BMI View: We have revised down our expectations for Iran's insurance sector over the course of 2015 and the forecast period. The is largely due to a weaker than expected economy, with continued international sanctions suppressing growth. Nonetheless, the sector should achieve strong single-digit growth in 2015.

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 leading insurers, continues to provide only limited data. However, recent information suggests that total premiums are growing strongly. Growth is...

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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 US$832.5mn. Per capita expenditure, however, is the sixth lowest in the MEA, at US$11. 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 US$832.5mn. However, per capita expenditure is very low, at US$11. The market is projected to grow by a...

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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:  We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. 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 negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a...

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Oil & Gas

Iran Oil & Gas

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BMI View : Despite a small increase in oil production and exports following the Geneva Interim Agreement, a more significant increase of Iranian crude production and exports 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 (at the very least) 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, destroying some of the country's production capacity. 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...

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Petrochemicals

Iran Petrochemicals

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The easing of sanctions will have a positive effect on the Iranian petrochemicals industry with hope for improved growth in output, according to BMI's latest Iran Petrochemicals Report. However, weak external markets, the declining cost differential between naphtha and ethane and domestic feedstock constraints will undermine government targets in 2015.

Although Iran began exports to the EU in January 2015, the collapse in crude prices and their effect on naphtha prices has undermined the competitiveness of the country's largely ethane-fed petrochemicals industry. Additionally, Iran is expected to undershoot the government's production and export targets for FY2014/15, undermining the credibility of its petrochemicals development programme. The main reason for the failure of the government's programme is the deleterious effect of prolonged sanctions, which deterred investment and caused domestic economic decline. Any...

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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. The rapid depreciation of the rial means that we expect the value of the market to contract sharply in US dollar terms. While improved international relations have reduced the regulatory risk associated with operating in the market for multinational drugmakers, the recent proclamation of the Islamic State (IS) in neighbouring Iraq and Syria increases the threat of political instability.

Headline Expenditure Projections

  • Pharmaceuticals: IRR44,216bn (USD2.46bn) in 2013 to IRR51,684bn (USD1.63bn) in 2014; +16.9% in local currency terms and -33.9% in US dollar terms.

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Power

Iran Power

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BMI View: Iranian 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 continue financing 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 to increase its nuclear capacity, plans which had been boosted by...

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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. However, we note increased risk to our projections since our last quarterly update, as plummeting oil prices will weigh on Iranian economic activity and port throughputs.

Our outlook for the Iranian shipping sector depends on the current rapprochement between the pariah state and the West, and the attendant relaxation of sanctions, continuing. The Iranian economy will expand slowly in 2015 as talks on the nuclear programme continue without reaching a breakthrough, and BMI projects real GDP growth of 2.8% in 2015, following our estimate of a 2.9% contraction in 2013 and 2.8% growth in 2014. The shipping sector will be a major...

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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. Furthermore, the Iranian government is keen to restrict access to international internet content, creating a national internet network that will bypass international gateways and cut off large swathes of global content. For this, the government began talks with the Chinese government in early 2014. That said, over the medium term there is catch-up potential in Iran, and its large and young population should make it one of the most attractive telecoms markets in the Middle East.

Key Data

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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...

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