Iran Defence and Security Report Q2 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	60
ISBN Number	1749-1444
Product Code	BMI01953

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£425.00
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Summary

In mid-February Iran was reported to have injected small amounts of uranium gas into advanced centrifuges it was testing at its main nuclear complex. The country was said to be testing new centrifuges to replace an older, erratic facility. Western diplomatic sources said this was a further technical step along the road to gaining the capacity to develop an atom bomb if Tehran desired to pursue that route, and as such was a 'stunning rejection' of UN Security Council demands that the country suspend key aspects of its nuclear programme. Tehran's official position remained that it has been seeking to enrich uranium only for the peaceful development of nuclear power to generate electricity. It is under UN sanctions for hiding the programme up until 2003 and for preventing UN inspectors since then from verifying that it is wholly peaceful, and for refusing to suspend it pending that verification. The diplomatic sources said Iran's technicians were test-feeding UF6 uranium gas into IR-2 'new generation' centrifuges at the Natanz enrichment complex. International Atomic Energy Agency (IAEA) officials did not comment on the reports. Despite refusing to allow IAEA inspectors to visit the centrifuges, the Iranian authorities gave ElBaradei a 'one-off' tour of the facility in January in what diplomats said was a 'gesture of transparency'. Although a US National Intelligence Estimate (NIE) published in December said that Iran had stopped trying to develop a nuclear warhead in 2003, it also noted a significant growth in its enrichment facilities could give it 'the latent ability to assemble nuclear weapons'.

In a mixed and sometimes confusing picture of Iran's security stance, there were nevertheless some positive signs. They included indications that the pragmatic factions in Iran's leadership were rallying their forces. Iran also appeared to have quietly agreed to cool its support for insurgent groups in neighbouring Iraq. These indications however co-existed with less encouraging ones, such as the appointment of a new, intransigent nuclear negotiator, a rocket launch in January, and President Ahmadinejad's continuing intransigence. We expect this interplay of light and shade to continue throughout most of 2008, although as we say our central hypothesis is that both Washington and Tehran will draw back from the brink of military confrontation.

In terms of its defence industry, Iran has the capability to supply its own armed forces, and any other armed group, with significant military hardware. Whilst state investment in the Iranian defence industry remains almost unheard of given a range of international sanctions, non-state actors do not face the same restrictions. This became apparent in the types of weapons being used by Hizbullah during the recent conflict with Israel.

Whilst Iran seems to be most at risk from confrontational Western foreign policies, it may in fact be internal Iranian politics that unravels President Ahmadinejad's current course. From day one the President has faced opposition from the higher echelons of power, who have been feared that his populist domestic policies and defiant foreign policies would cause splits and disunity in the existing centres of power. The internal political dimension may end up being the most prominent in 2008.

Content

Executive Summary .........5 SWOT Analysis.................6 Iran Political SWOT .............................................................. 6 Iran Security SWOT............................................................... 7 Iran Defence Industry SWOT................................................. 7 Iran Economic SWOT ............................................................ 8 Iran Business Environment SWOT......................................... 8 Political Overview.............9 Parliamentary Polls To Decide Ahmadinejad's Fate ............. 9 External Political Outlook ........................................................ 10 Security Risk Analysis...14 BMIs Security Ratings ........................................................ 14 Risk Ratings ......................................................................... 14 Table: Middle East & North Africa Defence & Security 14 Table: Middle East & North Africa: State Terrorism Vulnerability Index ........................................................................................................... 15 Regional Security: The Middle East and North Africa......... 15 Inter-State Conflicts............................................................. 15 Internal Conflicts ................................................................. 17 Iran Security Risk Ratings ................................................... 19 Conflict Risk ........................................................................ 19 Terrorism Risk ..................................................................... 20 Physical Safety Risk............................................................. 20 Security Overview ..........21 Internal Security Situation ................................................... 21 MKO.................................................................................... 21 Kurds ................................................................................... 21 Sunni Islamist Extremists..................................................... 22 Latest Developments ................................................................. 22 External Security Situation ....................................................... 23 United States........................................................................ 24 Israel.................................................................................... 25 Persian Gulf......................................................................... 26 Latest Developments ................................................................. 26 External Security: Recent Developments ............................. 28 Military Structure & Defence Industry..........................................................................................................29 Armed Forces ........................................................................... 29 Table: Regional Armed Forces (including conscripted) 20 29 Current Strength .................................................................. 30 Historical Strength............................................................... 31 Equipment............................................................................ 31 International Deployments................................................... 32 Table: Iran Foreign Deployments........................................ 32 Weapons of Mass Destruction.............................................. 32 Background.......................................................................... 32 Latest Developments ................................................................. 33 WMD: Recent Developments ............................................... 34 Delivery Vehicles ................................................................. 34 Market Overview ...................................................................... 35 Arms Trade Overview ............................................................... 36 Imports................................................................................. 36 Exports................................................................................. 37 Industry Trends & Developments......................................... 38 Table: Key Players Iran Defence Sector ........................... 38 Procurement Trends & Developments ...................................... 40 Industry Forecast Sce43 Table: Iran Defence Sector Army Enlargements............... 43 Table: Iran Defence Sector Government Expenditure....... 44 Key Risks to BMIs Forecast Scenario................................. 46 Macroeconomic Forecast ..............................................................................................................................47 External And Internal Pressures To Weigh On Growth....... 47 Holding Up In The Short Term............................................ 47 Risks To Outlook.................................................................. 48 Table: Iran Economic Activity .......................................... 49 Company Profiles...........50 Profiles Indigenous Manufacturers........................................ 50 Defence Industries Organisation (DIO)............................... 50 Aerospace Industries Organisation (AIO) ........................... 52 Ammunition Industries Group (AMIG) ................................ 53 Integrated Electronics Industries (IEI) ................................ 54 Profiles Foreign Manufacturers............................................. 55 China Great Wall Industries Corporation ........................... 55 Sukhoi .................................................................................. 56 Ulan-Ude Aviation Plant ..................................................... 57 BMI Forecast Modelling .58 How we generate our industry forecasts .............................. 58 Defence Industry ....................................................................... 58 Sources ..................................................................................... 59

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Product features / use

Scope	Expert Insight/Opinion
Level	General Industry Strategies
Data	Detailed Market Forecasts
Profiles	Profiles of Key Companies
Features	Contains SWOT Analysis
Extra Info	Consumer Trends Highlighted