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Iran Defence and Security Report Q1 2011
Business Monitor International, Jan 2011, Pages: 98
Business Monitor International's Iran Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Iran's defence and security industry.
Iran is one of several countries that would like to see themselves as leaders of the Muslim community in the Middle East and surrounding areas. By way of promoting this view, they are projecting their influence through support for organisations such as Hizbullah. Iran has allied factions in Iraq and Lebanon, and close relations with Syria. They are engaged in a proxy war with Saudi Arabia in Yemen.
The radical nature of the Iranian regime has made it the vanguard of anti-Israeli sentiment in the region. More importantly though there are two key factors that mitigate against Iran assuming any sort of regional leadership status. The first is that Iran is Persian and not Arab. The second is that the country is Shi’a and not Sunni (only 10-13% of the word’s Muslim population is Shi’a).
Iran’s seeming determination to become a nuclear power raises tensions across the region. If successful, it could cause other countries in the region such as Saudi Arabia, Egypt and Turkey to consider establishing nuclear weapons programmes of their own. More immediately there is the overhanging threat of military action by Israel and/or the US against Iran’s nuclear facilities, even though there is a substantial reluctance to pursue such a course since the consequences are somewhat unpredictable.
The more immediate threats to the regime are internal. Weak economic progress, exacerbated by US pressure on key trading partner the UAE, is making the government and the President, Mahmoud Ahmadinejad, increasingly unpopular. Nonetheless, while Ahmadinejad's administration will face public protests over the weak state of the domestic economy, these will probably lack the numbers or breadth of appeal to unseat him. Even so, with Iran's economy expected to remain structurally weak over the medium term, the risk that public unrest could exacerbate internal regime schisms is certainly pronounced.
The larger risks stem from divisions within the regime.
Several prominent political figures are reportedly working to undermine Ahmadinejad in the eyes of Supreme Leader Ayatollah Ali Khamenei, possibly with a view to forcing his impeachment before his second and final term ends in summer 2013. As with most regime change events it has usually proved virtually impossible to predict in advance when, or if, the critical tipping point would be reached.
The lack of any official economic figures post Q308 suggests the results were poor and the government is reluctant to release information that would only add to its political woes. In the absence of any better data were are leaving our GDP growth forecast for this financial year (March 2010-February 2011) unchanged at 2.1% rising to 3.0% in 2011 and 3.5% through the balance of the forecast period.
Iran is one of the world’s largest crude oil producers and in FY2007/08 the oil industry represented 27% of GDP. We see oil production remaining essentially flat over the forecast period, meaning it will not be able to contribute to economic growth.
The defence sector operates under severe international sanctions that greatly restrict both imports and export
s. Domestically the military-industrial complex was centralised under the Defence Industries Organization (DIO) in 1981. While there has been some relaxation in this level of central control, the majority of the industrial base is still conducted by companies operated by the state-owned DIO. There are few, if any, opportunities for foreign investment in the present environment.'
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