QUESTIONS? 844.937.3268

       


Official Name: Islamic Republic of Iran

Internet Domain: .ir
International Dialing Code: +98
Time Zone: UTC +3.5

Table of Contents

Location and Size Comparative Economic Indicators
Government Credit and Collections
Legal System Risk Assessment
People Business Climate
Economy Business Protocol
Economic Indicators Other Sources of Information

Location and Size

Iran is located in the Middle East, bordering the Gulf of Oman, the Persian Gulf and the Caspian Sea, between Iraq and Pakistan. Iran’s area is 1.6 million sq. km. (636,295 sq. mi.), which is slightly larger than Alaska. Only 9.78% of the country is arable land.

Government

Islamic Republic. Iran became a unique Islamic republic in 1979, when the monarchy was overthrown and religious clerics assumed political control under supreme leader Ayatollah Khomenei.

Branches include:

  • Executive – Supreme Leader (head of state) Ayatollah Ali Khamenei (appointed for life in June 1989), president (head of government) Mahmoud Ahmadi-Nejad, Council of Ministers, Assembly of Experts, Expediency Council, Council of Guardians
  • Legislative – 290-member National Assembly
  • Judicial – Supreme Judiciary

The Supreme Leader - the highest power in the land - appoints the head of the judiciary, military leaders, the head of radio and TV and Friday prayer leaders. He also confirms the election of Iran's president, selects six members of the 12-member Guardian Council, an influential body which has to pass all legislation and which can veto would-be election candidates.

Legal System

Based on Sharia (Islamic) law. Iran has not accepted compulsory International Court of Justice (ICJ) jurisdiction. (What does this mean?)

People

About half of the population is under 25 years old. Do not confuse Iranians with Arabs. Both have different languages, cultures and histories.

  • Population: 66,429,284 (July 2009 est.)
  • Population growth rate: 0.883% (2009 est.)
  • Languages: Persian (aka Farsi - official) and Persian dialects 58%, Turkic and Turkic dialects 26%, Kurdish 9%, Luri 2%, Balochi 1%, Arabic 1%, Turkish 1%, other 2%
  • Literacy: 77% (2002 est.)
  • Ethnic Make-up: Persian 51%, Azeri 24%, Gilaki and Mazandarani 8%, Kurd 7%, Arab 3%, Lur 2%, Baloch 2%, Turkmen 2%, other 1%
  • Religions: Muslim 98% (Shia 89%, Sunni 9%), other (includes Zoroastrian, Jewish, Christian, and Baha'i) 2%



Economy

Iran has an abundance of energy resources - substantial oil reserves and natural gas reserves second only to those of Russia. However, the economy is marked by an inefficient state sector; reliance on the oil sector, which provides the majority of government revenues; and, statist policies, whereby most economic activity is controlled by the state. Private sector activity is typically limited to small-scale workshops, farming, and services. The country suffers from double-digit unemployment, under-employment, and inflation.

After several years of strong growth spurred by public spending, the economy fell sharply in 2008/2009. Due to aging infrastructure and decreasing foreign demand, oil production declined. Activity stalled in the non-oil sector, despite the more expansionary fiscal policy pursued in the run-up to the presidential elections held in June this year. As a poor economic outlook continues, the growth slowdown is expected to continue in 2009/2010.

Because of its position on the nuclear issue, Iran has been subjected to United Nations sanctions and economic and financial isolation. These have undermined the business climate and compromised the economy's prospects for development.

As long as the country maintains its current position on the nuclear issue, the entire economy will continue to suffer from the inflationary effect of sanctions and lack of foreign investment. The political instability triggered by the outcome of the June presidential elections has had an additional negative impact on economic activity. However, a gradual upturn of oil prices could foster a slight economic recovery in 2010/11.

Currency: Rial (IRR)

Leading Markets (2007): China 15%, Japan 14.3%, Turkey 7.4%, South Korea 7.3%, Italy 6.4%

Leading Exports-commodities: petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets

Leading Suppliers (2007): China 14.2%, Germany 9.6%, UAE 9.1%, South Korea 6.3%, Russia 5.7%, Italy 5%

Leading Imports-commodities: industrial raw materials and intermediate goods, capital goods, foodstuffs and other consumer goods, technical services

Top Industries: petroleum, petrochemicals, fertilizers, caustic soda, textiles, cement and other construction materials, food processing (particularly sugar refining and vegetable oil production), ferrous and non-ferrous metal fabrication, armaments

Top Agricultural Products: pistachios (world’s largest producer ), wheat, rice, other grains, sugar beets, sugar cane, fruits, nuts, cotton; dairy products, wool; caviar

Economic Indicators

2005/06 2006/07 2007/08 2008/09(e) 2009/10(f) 2010/11(f)
GDP (USD billions) 222.1 285.3 382.3 442.6 508.1
GDP per capita (USD) 3,152.0 3,981.0 5,247.0 5,974.0 6,743.0
Economic growth (%) 5.7 6.2 6.9 3.1 1.9 2.1
Inflation (%) 12.1 12.1 19.7 25.4 17.6 14.1
Exports (USD billions) 64.4 76.1 97.4 94.6 68.2 80.2
Imports (USD billions) 43.1 50.0 56.6 71.3 68.4 78.1
Foreign debt (% of GDP) 13.1 10.7 10.2 7.4 5.3 5.4
Foreign currency reserves
(in months of imports)
9.4 10.9 12.2 11.2 10.6 8.3
Exchange rates (IRR per USD) 2009=August 19th 8,283.1 9,491.8 9,532.0 9,637.8 10,161.0
Exchange rates (IRR per EUR) 2009=August 19th 10,295.8 11,928.5 13,064.0 14,145.7 14,339.8

(e) estimate (f) forecast
Sources: Coface @rating and FITA

Comparative Economic Indicators - 2008

Iran Iraq Pakistan Turkey Saudi Arabia Afghanistan
Population* (millions) 66.4 28.9 176.2 76.8 28.7 33.6
Population growth rate* (%) 0.9 2.5 1.9 1.3 1.8 2.6
Median age*
(male and female)
27.0 20.4 20.8 27.7 21.6 17.6
Literacy (%) 77.0
2002 est.
74.1
2000 est.
49.9
2005 est.
87.4
2004 est.
78.8
2003 est.
28.1
2000 est.
GDP** (USD billions) 842.0 112.8 452.7 906.5 582.8 23.0
GDP per capita** (USD) 12,800.0 4,000.0 2,600.0 12,000.0 20,700.0 800.0
Economic growth 3.1 9.8 1.3 1.1 4.6 7.5
Inflation 25.4 12.0 21.0 10.4 9.9 13.0
Unemployment rate (%) 12.5 18.2 7.4 7.9 8.8 40.0
Exports (USD billions) 94.6 62.0 18.5 140.7 303.7 2.0
Imports (USD billions) 71.3 40.8 31.1 193.9 108.3 8.8
Currency Rial
IRR
Dinar
IQD
Rupee
PKR
Lira
TRY
Riyal
SAR
Afghani
AFN
Exchange rates (per USD) 8/19/2009 9,637.8 1,174.6 82.4 1.5 3.8 49.9
Exchange rates (per EUR) 8/19/2009 14,145.7 1,657.7 116.3 2.1 5.3 70.5

* 2009 estimates
** PPP – Purchasing Power Parity
Sources: CIA World Factbook, Coface, Oanda

Credit and Collections

As the U.S. has trade sanctions against Iran, ABC-Amega does not collect in and does not have any current experience collecting in Iran.

Risk Assessment

Coface Country Rating: D -- A high-risk political and economic situation and an often difficult business environment can have a significant impact on corporate payment behavior. Corporate default probability is very high.

Coface Business Climate Rating: C -- The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments.

Ducroire Delcredere Political Risk Rating: 5 – high risk (1-7)
Ducroire Delcredere Commercial Risk Rating: C – high risk (A, B, C)

Business Climate

Iran has been designated a state sponsor of terrorism due to its activities in Lebanon, and elsewhere in the world. Because of its continued involvement in terrorism, and its nuclear weapons ambitions, it remains subject to U.S., UN, and EU economic sanctions and export controls. The UN Security Council has passed a number of resolutions since 2006 calling for Iran to suspend uranium enrichment and reprocessing and to comply with its International Atomic Energy Agency (IAEA) obligations.

Iran's five-year economic plans have emphasized a gradual move towards a market-oriented economy, but political and social concerns, and external debt problems, have hampered progress.

Economic Freedom: Iran scored 44.6 on the 2009 Index of Economic Freedom (The Heritage Foundation) making it the 168th freest (out of 179). A score below 50 is considered “mostly unfree”. Iran ranks 16th out of 17 countries in the Middle East/North Africa region and the overall score is below the world average.

U.S. Economic Sanctions: The U.S. sanctions against Iran apply to all U.S. persons and entities (companies, non-profit groups, government agencies, etc.) wherever located. Below is an overview of the U.S. sanctions against Iran:

Reason for Sanction Date What is Sanctioned
Support of international terrorism and aggressive actions against non-belligerent shipping in Persian Gulf 10/29/1987 Embargo on Iranian-origin goods
Sponsorship of international terrorism and pursuit of weapons of mass destruction 05/06/1995 Prevention of U.S. involvement in petroleum development in Iran
Clarification of above 08/19/1997 Prohibition of virtually all trade and investment activities
Easement of sanctions 03/17/2000 Eased to allow U.S. persons to purchase and import carpets and food products (dried fruits, nuts and caviar)
11/10/2008 Revoked authorization to process transfers involving Iran that originate and end with non-Iranian foreign banks
Current Imports allowed: gifts valued at $100 or less; information or informational materials; specific foodstuffs; carpets and other specific textiles
Current Exports not allowed (unless licensed by OFAC): goods; technology; services; either directly or indirectly.

The above is not an exhaustive list. See Iran – What You Need To Know About U.S. Economic Sanctions.

For further information on U.S. Economic Sanctions related to Iran, visit the website of the U.S. Department of the Treasury Office of Foreign Assets Control.

Some Recent Articles on U.N. and EU Sanctions against Iran

EU, Germany mulling tougher sanctions against Iran, WashingtonTV.com, August 19, 2009

Israeli FM calls for UN sanctions on Iran, AFP, July 27, 2009

Business Protocol

Iranians see themselves as having two distinct identities: "zaher" (public) and "batin" (private). The inner circle forms the basis of a person's social and business network. Loyalty to the family comes before other social relationships and business in Iran. Nepotism is considered a good thing, since it implies that employing people one knows and trusts is of primary importance.

Iranians prefer to do business with those they know and respect, therefore they expect to spend time cultivating a personal relationship before business is conducted. Whom you know is often more important than what you know, so it is important to network and cultivate a number of contacts.

Business Cards: Business cards are only exchanged by senior-level people. Make sure your business card includes your title and have one side translated into Farsi. Present your card so the Farsi side faces the recipient.

Business Attire: Since Iranians judge people on appearances, dress appropriately and stay in a high standard hotel. Business attire is formal and conservative. Men should wear dark colored conservative business suits. Women should always dress modestly and cover their hair.

Names and Titles: Address your Iranian business associates by their title and their surname. Wait to be invited before moving to first names.

Conversation: In Iran, the concept of family is more private than in many other cultures. Female relatives must be protected from outside influences and are taken care of at all times. It is inappropriate to ask questions about an Iranian's wife or other female relatives.

Gifts: If you are invited to an Iranian's house, take flowers or pastry to the hosts. When giving a gift, always apologize for its inadequacy. Gifts should be elegantly wrapped and are not generally opened when received.

Meetings: Appointments are necessary and should be made 4 to 6 weeks in advance. Confirm the meeting one week in advance and when you arrive in the country. Punctuality is seen as a virtue. The first meeting with an Iranian company is generally not business-focused. Expect your colleagues to spend time getting to know you as a person.

Written materials should be available in both Farsi and English. Do not remove your suit jacket without permission. Do not look at your watch or try to rush the meeting. If you appear fixated on the amount of time the meeting is taking, you will not be trusted.

Negotiations: Iranians are deliberate negotiators who can drive a hard bargain. Iranians may display emotion, walk out of the meeting, or even threaten to terminate the relationship in an attempt to convince you to change your position. Iranians often use time as a negotiating tactic, especially if they know that you have a deadline. Decisions are made at the top of the company, either by one person or a small council. Your success is defined by your ability to build effective personal relationships, combined with a clearly outlined and well-presented proposal.

Acceptable Public Conduct: Avoid talking loudly. Do not hold hands with the opposite sex in public, unless these are children or older members of the family.

Sources for further information on doing business in Iran

Generally, due to U.S. sanctions, U.S. companies are not allowed to do business in Iran. However, for those countries and businesses allowed to do business in Iran, here are some resources.

Doing Business in Iran, Social networking site

Iran, New Zealand Trade & Enterprise

Iran – Doing Business, Austrade (Australian Government)

*****

Subscribe to the Credit-to-Cash Advisor
Monthly e-Newsletter -- It's Free

This information is provided by ABC-Amega Inc. This report represents a compilation of information from a wide variety of reputable sources.

Economic Indicators: Variety of sources including the CIA World Factbook, Coface Country Rating, Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Historical Exchange Rates: OANDA.com The Currency Site.