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Market |
Defence |
Report Type |
Market Research |
Country |
Iran |
Published |
4 March 2009 |
Number of Pages |
51 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The two-fold underlying fundamental tension between Iran, on the one hand, and the US and key UN Security Council members on the other, over Iran’s nuclear enrichment programme, combined with its aggressive stance towards Israel, remained essentially unchanged during the course of last quarter. A letter of congratulations sent by Iran’s President Mahmoud Ahmedinejad to then president-elect Barack Obama in the wake of the latter’s decisive electoral victory in early November raised the possibility of a rapprochement between Iran and the US. However, the Iranian government is not co-operating with the international community in relation to the development of its own nuclear industry.
While it is not our core scenario, a military conflict in the Gulf would send serious shockwaves across the globe. In a political sense, any attack would destabilise the fragile Middle East, and potentially cause a deep power split in the region between pro-US and pro-Iran governments, which could potentially hamper regional stability in years to come. Furthermore, on an economic level, Iran remains a vital oil and gas producer – the fourth largest in the world for both resources – and any attack on the country would be disastrous for global oil markets.
In terms of its defence industry, Iran has the capability to supply its own armed forces, and many other armed groups, with significant amounts of a variety of military hardware. While 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.
International sanctions and the global economic slowdown, in addition to lower oil prices and elevated inflation levels, will conspire to slow economic growth over the forecast period, from 4.9% in 2008-2009, to 3.6% in 2013-2014. In addition, the ongoing stand-off between Iran and the West over the former's nuclear programme will continue to have negative implications for foreign investment. However, from January 2009 a new US president has taken over from George Bush and relations with Iran could feasibly take a turn for the better. In this scenario, the Islamic Republic could emerge from relative economic isolation, resulting in upside risks to our growth projections.
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