Country Report Iran July 2009

Outlook for 2009-10

• Public criticism of the supreme leader, Ayatollah Ali Khamenei, because of his direct intervention in the political domain, has exposed a powerful breach in Iran's intricate power structure, which may weaken his authority.
• The position of the president, Mahmoud Ahmadinejad, will be increasingly challenged by fragments of the clerical establishment as well by his reformist and pragmatic-conservative opponents, following his divisive re-election.
• The Economist Intelligence Unit does not expect a military conflict between the US and Iran over the latter's nuclear programme in 2009-10. However, progress on negotiations between the two will be slow.
• The hydrocarbons industry, which provides over 80% of government revenue, will continue to suffer from insufficient investment, as foreign companies remain, in effect, excluded from the country and as oil revenue plummets.
• We forecast that Iran's real GDP growth will slow to just 0.5% in fiscal year 2009/10 (March 21st-March 20th), as a result of the marked slowdown in the global economy. We expect real GDP growth to recover to 2.9% in 2010/11.
• Average consumer price inflation is expected to decline over the forecast period, from 25.5% in 2008 to 19.1% in 2009 and 16.5% in 2010, owing to a sharp drop in international oil and non-oil commodity prices.

Monthly review

• The disputed re-election of Mahmoud Ahmadinejad as president on June 12th has exacerbated the deep political divisions in Iran, and forced the supreme leader to make an unprecedented intervention in the political domain.
• A heavy security clampdown by the authorities against post-election demonstrators has reflected a genuine fear among conservative hardliners of a potential social revolution inside the Islamic Republic.
• Significant progress on talks with the West over Iran's nuclear programme now appears unlikely given the entrenchment of conservative rule.
• The post-election unrest has split the clerical establishment, and a number of senior clerics, while not directly criticising the conservative leadership, have attacked the handling of the election and its aftermath.
• Mr Ahmadinejad is expected to face stiff challenges in his second term as Iran's economy has continued to suffer under difficult local and global economic conditions.
• An Austrian energy firm, OMV, has announced that it may limit its investment in Iran's giant South Pars gasfield owing to the worsening political climate in the country.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;49;60;53;59;48;2834;80;1;70
NAICS Code: 336;22;52;44;517;3254;62;11;72