Country Report Iran October 2009

Outlook for 2010-11

• Public criticism of the supreme leader, Ayatollah Ali Khamenei, because of his direct intervention in the political domain, has exposed a large breach in Iran's intricate power structure, which may weaken his authority in 2010-11.
• The position of the president, Mahmoud Ahmadinejad, will be increasingly challenged by sections of the clerical establishment as well as 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 2010-11. 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.
• We forecast that Iran's real GDP growth will increase to 2.9% in fiscal year 2010/11 (March 21st-March 20th), as a result of the pick up in the global economy. We expect real GDP growth to strengthen further to 3.5% in 2011/12.
• We forecast that average inflation will decline over the forecast period, from an estimated 16.8% in 2009 to 14% in 2010 and 12.5% in 2011, owing to relatively low international non-oil commodity prices.

Monthly review

• Talks between Iran and the world powers in the Swiss city of Geneva on October 1st were the most positive in many years in helping to reduce international tension over the Islamic Republic's nuclear programme.
• Ahead of the talks, the US revealed, and Iran confirmed, that the latter has been building a second enrichment plant near the holy city of Qom. Iran was accused of breaching its international obligations by keeping the site secret.
• Political unrest following the disputed presidential election in June has abated. A former president, Akbar Hashemi Rafsanjani, who opposes the incumbent president, has called on all political camps to come together.
• The likelihood of more sanctions against Iran, this time targeting its petrol imports, has lessened following the diplomatic progress at the Geneva talks.
• The largest sell-off in the history of the Tehran Stock Exchange—that of the Telecommunication Company of Iran—in late September has raised questions over the genuineness of the privatisation programme in the country.
• The Pars Oil and Gas Company is seeking parliamentary approval for a €1bn (US$1.4bn) bond that it is hoping to issue in December.

This report covers the following industry codes:
SIC Code: 49;1;60
NAICS Code: 22;11;52