The Economy
While nearby Arab economies fed off the oil boom, Iran has lurched from one economic crisis to the next. International sanctions play an increasingly important part in this, but another primary cause is mismanagement. Massive spending on subsidies and handouts - about a quarter of government expenditure - has done little to alleviate rural poverty. However, at the end of 2010, president Mahmoud Ahmadinejad started phasing out the $100 billion annual subsidies that held down prices of fuel and food, garnering praise from the International Monetary Fund. The crunching effect of international sanctions was blamed in April 2013 for pushing inflation beyond 30 per cent. The Oil Stabilisation Fund, established by the Iranian state to reduce its dependence on oil, is said in fact to be used for the development of the oil and gas sector. While Irans oil and gas industry has huge potential, international sanctions have again prevented it from attracting foreign expertise and, more importantly, foreign capital. A healthy trade finance flow has slowed to a trickle since the nuclear wrangle with the US led to sanctions.
Politics
Mahmoud Ahmadinejad won the Islamic Republics tenth presidential election in June 2009, sparking mass protests. A violent crackdown by security forces on protesters, who claimed the election was rigged, was condemned by western nations. The confused aftermath of the poll has complicated the Obama administrations planned outreach to Tehran and hopes for negotiations over Irans nuclear programme. The UN nuclear watchdog has drafted a deal that would see uranium for Irans power stations enriched abroad. US president Barack Obama has previously warned that the world will take further steps against the country if negotiations fail to bear fruit. However, the Iranian leadership may still prove amenable to a compromise on its nuclear development. A more open dialogue between Washington and Tehran could even improve prospects for a comprehensive Middle East peace deal. For its part, Tehran will be working to create new alliances, particularly among the club of oil and gas producers.
| Sovereign ratings | ||
| Standard & Poors | na | na |
| Moodys | na | na |
| Fitch Ratings | na | na |
