Country Report Iran November 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 difficult.
• 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 15.8% in 2009 to 13.8% in 2010 and 12% in 2011, owing to relatively low international non-oil commodity prices.

Monthly review

• The initial optimism surrounding talks between Iran and the world powers over the Islamic Republic's nuclear programme has petered out, after Iranian officials demanded revisions to an agreement reached in Geneva.
• A report by a British newspaper, The Guardian, has claimed that the UN nuclear watchdog, the International Atomic Energy Agency, asked Iran to explain evidence that it had conducted nuclear weapons research.
• Sporadic opposition protests against the re-election of Mahmoud Ahmadinejad as president resumed in early November.
• A Sunni Baluchi group, Jundallah, has claimed responsibility for a bomb attack in south-eastern Iran in mid-October that killed at least 43 people.
• The privatisation of the Telecommunication Company of Iran remains on track following reports that the consortium that secured the deal, Etemad-e Mobin, has signed a contract for a 50% stake (plus one share).
• Two South Korean companies have announced large contracts in Iran's energy sector, defying Western pressure against deals with the Islamic Republic.
• Talks with a French energy company, Total, to develop Phase 11 of the giant South Pars gasfield have resumed, according to Iranian officials.

This report covers the following industry codes:
SIC Code: 48;49
NAICS Code: 517;22