Coutnry Profile

Coutnry name: Islamic Republic of Iran

Capital : Tehran

Religion : Islam

Currency : Rial

Known as Persia until 1935, Iran became an Islamic republic in 1979 after the ruling monarchy was overthrown and Shah Mohammad Reza PAHLAVI was forced into exile. Conservative clerical forces led by Ayatollah Ruhollah KHOMEINI established a theocratic system of government with ultimate political authority vested in a learned religious scholar referred to commonly as the Supreme Leader who, according to the constitution, is accountable only to the Assembly of Experts - a popularly elected 86-member body of clerics. US-Iranian relations became strained when a group of Iranian students seized the US Embassy in Tehran in November 1979 and held embassy personnel hostages until mid-January 1981. The US cut off diplomatic relations with Iran in April 1980. During the period 1980-88, Iran fought a bloody, indecisive war with Iraq that eventually expanded into the Persian Gulf and led to clashes between US Navy and Iranian military forces. Iran has been designated a state sponsor of terrorism for its activities in Lebanon and elsewhere in the world and remains subject to US, UN, and EU economic sanctions and export controls because of its continued involvement in terrorism and its nuclear weapons ambitions. Following the election of reformer Hojjat ol-Eslam Mohammad KHATAMI as president in 1997 and a reformist Majles (legislature) in 2000, a campaign to foster political reform in response to popular dissatisfaction was initiated. The movement floundered as conservative politicians, through control of unelected institutions, prevented reform measures from being enacted and increased repressive measures. Starting with nationwide municipal elections in 2003 and continuing through Majles elections in 2004, conservatives reestablished control over Iran's elected government institutions, which culminated with the August 2005 inauguration of hardliner Mahmud AHMADI-NEJAD as president. His controversial reelection in June 2009 sparked nationwide protests over allegations of electoral fraud. The UN Security Council has passed a number of resolutions calling for Iran to suspend its uranium enrichment and reprocessing activities and comply with its IAEA obligations and responsibilities. In mid-February 2011, opposition activists conducted the largest antiregime rallies since December 2009, spurred by the success of uprisings in Tunisia and Egypt. Protester turnout probably was at most tens of thousands and security forces were deployed to disperse protesters. Additional protests in March 2011 failed to elicit significant participation largely because of the robust security response, although discontent still smolders. Deteriorating economic conditions due primarily to government mismanagement and international sanctions prompted at least two major economically based protests in July and October 2012.

ECONOMY OF IRAN

Iran's economy is marked by statist policies and an inefficient state sector, which create major distortions throughout the system, and reliance on oil, which provides a large share of government revenues. Price controls, subsidies, and other rigidities weigh down the economy, undermining the potential for private-sector-led growth. Private sector activity is typically limited to small-scale workshops, farming, some manufacturing, and services. Significant informal market activity flourishes and corruption is widespread. Tehran since the early 1990s has recognized the need to reduce these inefficiencies, and in December 2010 the Majles passed President Mahmud AHMADI-NEJAD's Targeted Subsidies Law (TSL) to reduce state subsidies on food and energy. This was the most extensive economic reform since the government implemented gasoline rationing in 2007. Over a five-year period the legislation sought to phase out subsidies that previously cost Tehran $60-$100 billion annually and mostly benefited Iran''s upper and middle classes. Cash payouts of $45 per person to more than 90% of Iranian households mitigated initial widespread resistance to the TSL program. However, inflation in 2012 reached its highest level in four years, eroding the value of these cash payouts and motivating the Majles to halt planned price increases for the second half of 2012 through at least March 2013. New fiscal and monetary constraints on Tehran, following international sanctions in January against Iran''s Central Bank and oil exports, significantly reduced Iran''s oil revenue, forced government spending cuts, and fueled a 20% currency depreciation. Economic growth turned negative for the first time in two decades. Iran also continues to suffer from double-digit unemployment and underemployment. Underemployment among Iran''s educated youth has convinced many to seek jobs overseas, resulting in a significant "brain drain."

GDP (purchasing power parity): $1.016 trillion (2012 est.)country comparison to the world: $1.035 trillion (2011 est.) $1.005 trillion (2010 est.) note: data are in 2012 US dollars

GDP (official exchange rate): $548.9 billion (2012 est.)

GDP - real growth rate: -1.9% (2012 est.)country comparison to the world: 3% (2011 est.) 5.9% (2010 est.)

GDP - per capita (PPP): $13,300 (2012 est.)country comparison to the world: $13,800 (2011 est.) $13,500 (2010 est.) note: data are in 2012 US dollars

Gross n ational saving: 30.3% of GDP (2012 est.)country comparison to the world: 36.6% of GDP (2011 est.) 34.7% of GDP (2010 est.)

GDP - composition, by end use: household consumption: 45.9%government consumption: 13.3% investment in fixed capital: 30.6% investment in inventories: 1.5% exports of goods and services: 25.3% imports of goods and services: -16.6% (2012 est.)

.)

GDP - composition, by sector of origin: agriculture: 9.8%industry: 46.2% services: 44.1% (2012 est.)

Agriculture - products:

wheat, rice, other grains, sugar beets, sugarcane, fruits, nuts, cotton; dairy products, wool; caviar

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

Industrial production growth rate:

-5.8% (2012 est.)

country comparison to the world:

Population below poverty line:

18.7% (2007 est.)

Household income or consumption by percentage share:

lowest 10%: 2.6%

highest 10%: 29.6% (2005)

Distribution of family income - Gini index:

44.5 (2006)

country comparison to the world:

Budget:

revenues: $79.69 billion

expenditures: $92.63 billion (2012 est.)

Taxes and other revenues:

14.5% of GDP (2012 est.)

country comparison to the world:

Budget surplus (+) or deficit (-):

-2.4% of GDP (2012 est.)

country comparison to the world:

Public debt:

18.4% of GDP (2012 est.)

country comparison to the world:

13.9% of GDP (2011 est.)

note: includes publicly guaranteed debt

Fiscal year:

21 March - 20 March

Inflation rate (consumer prices):

19.9% (2012 est.)

country comparison to the world:

20.6% (2011 est.)

note: official Iranian estimate

Central bank discount rate:

NA%

Commercial bank prime lending rate:

11% (31 December 2012 est.)

country comparison to the world:

11.25% (31 December 2011 est.)

Stock of narrow money:

$42.91 billion (31 December 2012 est.)

country comparison to the world:

$40.06 billion (31 December 2011 est.)

Stock of broad money:

$199.9 billion (31 December 2012 est.)

country comparison to the world:

$183.5 billion (31 December 2011 est.)

Stock of domestic credit:

$77.74 billion (31 December 2012 est.)

country comparison to the world:

$77.6 billion (31 December 2011 est.)

Market value of publicly traded shares:

$107.2 billion (31 December 2011)

country comparison to the world:

$86.62 billion (31 December 2010)

$63.3 billion (31 December 2009)

Current account balance:

-$9.307 billion (2012 est.)

country comparison to the world:

$59.38 billion (2011 est.)

Exports:

$67.04 billion (2012 est.)

country comparison to the world:

$144.9 billion (2011 est.)

Exports - commodities:

petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets

Exports - partners:

China 22.1%, India 11.9%, Turkey 10.6%, South Korea 7.6%, Japan 7.1% (2012)

Imports:

$70.03 billion (2012 est.)

country comparison to the world:

$77.81 billion (2011 est.)

Imports - commodities:

industrial supplies, capital goods, foodstuffs and other consumer goods, technical services

Imports - partners:

UAE 33.2%, China 13.8%, Turkey 11.8%, South Korea 7.4% (2012)

Reserves of foreign exchange and gold:

$74.06 billion (31 December 2012 est.)

country comparison to the world:

$84.06 billion (31 December 2011 est.)

Debt - external:

$14.84 billion (31 December 2012 est.)

country comparison to the world:

$19.11 billion (31 December 2011 est.)

Stock of direct foreign investment - at home:

$37.31 billion (31 December 2012 est.)

country comparison to the world:

$32.44 billion (31 December 2011 est.)

Stock of direct foreign investment - abroad:

$3.345 billion (31 December 2012 est.)

country comparison to the world:

$2.915 billion (31 December 2011 est.)

Exchange rates:

Iranian rials (IRR) per US dollar -

12,175.5 (2012 est.)

10,616.3 (2011 est.)

10,254.18 (2010 est.)

IRAN EXPORTS

the WTO in its report "World Trade 2011" has praised Iran’s export growth in 2011, noting that while world trade expanded in 2011 by only 5 percent, Iran’s exports raised more than 30 percent.

According to the report, Iran exported more than 131 billion dollars of merchandise in 2011, ranking as the 23rd biggest exporter in the world. The country’s exports in 2010 stood at 101 billion dollars, the report further said.[In 2011, Iran’s non-oil exports stood at USD 48.5 billion and are expected to reach USD 70 billion by 2013.Iran's non-oil exports increased over 500% in between 2005 and 2011.[ Iran's main non-oil exports are petroleum gases, liquefied gas hydrocarbons, liquefied propane, methanol, mineral fuels, chemical products, plastics, fruits, nuts, fertilizers, and carpets.

Iran's foreign trade was worth $140 billion in 2011.

Major exports: Petroleum oils, crude (72%), Petroleum oils, refined (8%), Petroleum gases (2%), Polymers of ethylene, in primary forms (2%), Acyclic alcohols (1%)

Major imports: Iron and nonalloy steel (3%), Parts and accessories of the motor vehicles (3%), Turbojets, turbo propellers and other gas turbines (3%), Hot rolled iron or non-alloy steel, coil,w

>600mm, t >10mm, myp 355 mpa (3%), Raw sugar, cane (2%)

Major trade partners (exports): Asia NES (26%), China (12%), Europe NES (11%), Japan (7%), India (5%)

Major trade partners (imports): United Arab Emirates (29%), China (17%), Germany (11%), Korea, Rep. (5%), Turkey (4%)

Foreign Trade and economic relations

Iran is a founding member of OPEC and the Organization of Gas Exporting Countries. Petroleum constitutes 80% of Iran's exports with a value of $46.9 billion in 2006. For the first time, the value of Iran’s non-oil exports is expected to reach the value of imports at $43 billion in 2011.[244] Pistachios, liquefied propane, methanol (methyl alcohol), hand-woven carpets and automobiles are the major non-oil exports. Copper, cement, leather, textiles, fruits, saffron and caviar are also export items of Iran.

Technical and engineering service exports in 2007–08 were $2.7 billion of which 40% of technical services went to Central Asia and the Caucasus, 30% ($350 million) to Iraq, and close to 20% ($205 million) to Africa. Iranian firms have developed energy, pipelines, irrigation, dams and power generation in different countries. The country has made non-oil exports a priority[88] by expanding its broad industrial base, educated and motivated workforce and favorable location, which gives it proximity to an estimated market of some 300 million people in Caspian, Persian Gulf and some ECO countries further east.

Total import volume rose by 189% from $13.7 billion in 2000 to $39.7 billion in 2005 and $55.189 billion in 2009. Iran's major commercial partners are China, India, Germany, South Korea, Japan, France, Russia and Italy. From 1950 until 1978, the United States was Iran's foremost economic and military partner, playing a major role in infrastructure and industry modernization.

Since the mid-1990s, Iran has increased its economic cooperation with other developing countries in "south-south integration" including Syria, India, China, South Africa, Cuba and Venezuela. Iran's trade with India passed $13 billion in 2007, an 80% increase within a year. Iran is expanding its trade ties with Turkey and Pakistan and shares with its partners the common objective to create a common market in West and Central Asia through ECO.

Since 2003, Iran has increased investment in neighboring countries such as Iraq and Afghanistan. In Dubai, UAE, it is estimated that Iranian expatriates handle over 20% of its domestic economy and account for an equal proportion of its population. Migrant Iranian workers abroad remitted less than $2 billion home in 2006. Between 2005 and 2009, trade between Dubai and Iran tripled to $12 billion; money invested in the local real estate market and import-export businesses, collectively known as the Bazaar, and geared towards providing Iran and other countries with required consumer goods. It is estimated that one third of Iran's imported goods and exports are delivered through the black market, underground economy, and illegal jetties.

Taxation of foreign companies

Taxation in Iran generates particular unease among foreign firms because they appear to be arbitrarily enforced[– tax bills are initially based on 'assumed earnings' calculated by the Finance and Economy Ministry according to the size of the company and the sector in which it operates. Factors such as the quality and location of a company's offices are also widely believed to have an impact on tax assessment.

All foreign investors doing business in Iran or deriving income from sources in Iran are subject to taxation. Depending on the type of activity the foreign investor is engaged in, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc.

Generally speaking, Iran has two types of laws concerning foreign companies. The first are laws that address issues concerning foreign companies directly such as the Foreign Investment Promotion and Protection Act (FIPPA) and the second are general laws of which certain articles or by-laws address foreign companies, for instance the Taxation Law and the Labor Law. The Tax Act had divided the source of income earned by foreign companies either direct or through their branches in Iran into three main categories:

Income earned in Iran by way of contracting operations Income earned from Iran by way of royalties and licensing fees Other activities - trading operations, etc.

Foreign legal entities must pay taxes on all taxable income earned through investments in mainland Iran or from direct or indirect (through agents, branch offices, etc.) activities in mainland Iran, at the flat rate of 25% as mentioned in Article 47 of the Amendment law.

Income from royalty and licensing fees received from industrial and mining companies, government ministries and municipalities, and income from film-screening rights are subject to a deemed taxable coefficient on income of 20 per cent. All other income from royalties and licences from foreign companies is subject to a deemed taxable coefficient on income of 30 per cent. The coefficients are based on the standard corporate tax rate of 25 per cent, so that the effective tax rate is either 5 per cent or 7.5 per cent.

Tax on Liaison, Representative and Branch Offices

The same corporate and profit taxes will be applied to the taxable income of branches of foreign companies (contractors, consultant engineers, et al.)

Other income earning activities of foreign branches will be subject to taxation on an actual basis, i.e. based on their income tax return as filed and supported by their statutory accounting books. Expenses incurred in Iran by Iranian registered branches and representative offices of foreign companies that are not authorised by their head offices to engage in any trading activity but are only authorised to conduct marketing and market research in Iran are tax deductible upon presentation of receipts from their head office.

Tax advantages & exemptions

Income tax exemptions are available to new factories established in "special areas", and last from four to eight years, from the first day of operations. In addition, 80% of the reported profit of all manufacturing, mining, assembly plant and related engineering companies are exempt from income taxes. Tax incentives, meanwhile, are available to manufacturing, mining, agricultural activities, exports and investment in special areas.

In the agricultural sector, by virtue of Article 81 of[ the revenues of activities in the fields of agriculture, animal husbandry and livestock, pisciculture, apiculture, raising poultry, hunting, fisheries, sericulture, and restoration of forests, pasturage, orchards, trees and palms of whatever kind are exempted from taxation.

The income of rural, tribal, and agricultural cooperative societies and those of fishermen, laborers, employees, students and their unions are 100 percent tax exempt.

The revenues from hand woven carpets and handicrafts and the related production cooperative companies and unions are exempt from taxation.

The revenues of inventors or discoverers from their innovations and discoveries are exempt from taxation. Also revenues of research and development activities of institutes which have obtained licenses for such activities from the relevant ministries will be exempt from taxation for 10 years as of the entry into force of the Amendment, according to the provisions of the relevant circular of the Council of Ministers.

Profit and awards accrued to participation papers are tax exempt.

All housing production projects for the low-income groups and housing production in the dilapidated urban fabrics will enjoy a discount of around 50% on construction tariffs and construction density fees. The remaining amount can be paid in installments and will not be subject to any commission fees.

Laws concerning foreign companies

Generally speaking, Iran has two types of laws concerning foreign companies. The first are laws that address issues concerning foreign companies directly such as the Foreign Investment Promotion and Protection Act (FIPPA) and the second are general laws of which certain articles or by-laws address foreign companies, for instance the Taxation Law and the Labor Law.

General laws and regulations regarding foreign business in Iran could be regrouped under the following categories:

Contract work - A foreign company is allowed to be involved in contractual work in Iran. Such work may be performed either directly by the foreign company or through a registered branch in Iran.

Direct sales - Most foreign companies are involved in direct sales to Iranian customers through letters of credit and, occasionally on the basis of Usance.

Investments - In accordance with the terms of the Foreign Investment Promotion and Protection Act (FIPPA), foreign companies may invest in newly established factories and industries. Foreign companies are allowed to own 100 per cent of the businesses in the free economic zones

Foreign Investment Promotion and Protection Act (FIPPA)

Protection through Enactment of FIPPA [13] Activity Level of Exemption Duration of Exemption

Agriculture 100% No Time LimitIndustry and Mining 80% 4 YearsIndustry and Mining in Less-Developed Areas 100% 10 YearsTourism 50% No Time LimitExports 100% No Time Limit

Location requirement for tax-exemption:

1. If investment located out of a 120-kilometer radius from the center of Tehran,2. If investment located out of a 50-kilometer radius from the center of Isfahan,3. If investment located out of a 30-kilometers radius from the centers of provinces (except

for the Industrial Estates within this radius)

100% of taxable income of all units located in less developed areas shall be tax exempted for a period of 10 years.

Tax exemption - major changes

The exemptions on exports of manufactured and agricultural goods remain in force, but an ambiguity has occurred in the amendment regarding exemptions extended to the public sector (Iranian Government owned entities). Government owned enterprises and their shares in the private sector entities were excluded from all exemptions granted under the Tax Act. This exclusion has been removed from the relevant texts in the amendment. Until clarification is provided, it is not certain whether or not the government minority shares in the private sector manufacturing, mining and exports activities would enjoy the exemptions granted.

The 50 per cent tax exemption previously granted to tourism enterprises has been extended to include five-star hotels.]

Losses

Losses sustained by all taxpayers engaged in trading and other activities, who are required to keep proper books of account, provided they are accepted by the tax authorities; will be carried forward and written off against future profits for a period of three years.

VAT tax exemption

VAT will not apply to free trade zones in Iran. However, goods and services entering Iran's customs territory will be subject to payment of VAT according to the law.[ Articles 12 and 13 stipulate that supply and importation of some commodities and services including the following shall be exempt from the VATA:

a) Unprocessed agricultural products; b) Livestock and live poultry, aquatic products, honey bees and silkworms; c) All types of fertilizers, pesticides, seeds and saplings; d) Bakery flour, bread, meat, sugar, rice, cereals and soya, milk, cheese, shortening and

baby formula; e) Books, press, notebooks and all types of printing papers, writing pads and papers and

press papers; f) Passenger goods for personal use, as exempted under the Export-Import Regulations ; g) Immovable property; h) All types of medicine, medical consumables, medical services (human, animal or

plant) as well as rehabilitation and other supportive services; i) Services subject to payment of salary taxes envisaged in the Direct Taxation Law; j) Banking and credit services rendered by banks, credit institutes and cooperatives,

authorized interest-free loan funds and cooperative funds; k) Public transportation services and urban and inter-city roads, railway, air and sea

passenger transport services; l) Hand woven carpets;

m) All types of research and training services, as stipulated in a By-Law to be approved by the Council of Ministers;

n) Animal and poultry feed; o) Export of goods and services from official exit points. Any tax paid on account of such

exports shall be reimbursed (as regards commodities) upon submitting a certification of the customs certifying the export of goods. Value Added Tax (VAT) does not apply to free trade zones (FTZ) in Iran. However, goods and services entering Iran's customs territory from FTZs will be subject to payment of VAT according to the law.

IRANIAN ECONOMIC GLOBALIZATION

Prior to 1979, Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s the country had undergone significant industrialization and economic modernization. This pace of growth had slowed dramatically by 1978 as capital flight reached $30 to $40 billion 1980 US dollars just before the revolution.

After the Revolution of 1979, Iran's government proceeded with 4 reforms:

1. First they nationalized all industry, including the NIOC, and all Iranian banks.2. The new Constitution divided the economy in 3 different sectors, namely "State",

"Cooperative" and "Private", with the majority being state-owned businesses.3. The Government started using central planning to control the economy, having the

Supreme Leader, the President and Majlis creating 5-year socio-economic plans.4. The State took control of setting Prices and Subsidies.

The government's long-term objectives since the revolution have been economic independence, full employment, and a comfortable standard of living for citizens, but at the end of the 20th century, the country's economy faced many obstacles. Iran's population more than doubled between 1980 and 2000 and grew increasingly younger. Although a relatively large number of Iranians are farmers, agricultural production has consistently fallen since the 1960s. By the late 1990s, Iran had become a major importer of food. At that time, economic hardship in the countryside resulted in vast numbers of people moving to cities.

The eight-year war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000. The cost of the war to the country's economy was some $500 billion. After hostilities with Iraq ceased in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy sectors (including its prospective nuclear power facilities), and began the process of integrating its communication and transportation infrastructure with that of neighboring states.

Since 2004, Supreme Leader Khamenei and President Ahmadinejad have tried to implement reforms that will lead to the privatization of Iran but they haven't worked out yet, making Iran a command economy in transition towards a market economy.

GDP growth

The Government of Iran projects GDP growth to average 8% between 2010 and 2015 in its 5-year economic development plan.[36]

According to Business Monitor International (BMI) in 2010, growth will average 3.6% between 2009/2010 and 2013/2014.[37][38] This is substantially below an estimated 5.6% for previous 5 years.[37]

The International Monetary Fund (IMF) forecasts Iran's economy will grow 1.6% in 2010 and 0% in 2011, from 1.1% in 2009 and 1% in 2008 and 7.8% in 2007.[39][40] Through the successful implementation of the Iranian Economic Reform Plan (targeted energy subsidy plan in particular), the IMF predicts Iran's economy to grow at a rate of 8% by 2014/2015.[41][42]

Projections by the Economist in 2010 place Iran's nominal GDP at $701.9 billion in 2013.[43][44] The Economist's 2010-revised projections for GDP growth in Iran are: 3.0% (2010); 3.0% (2011); 2.9% (2012); 3.1% (2013); 2.9% (2014); 2.9% (2015).

Foreign exposure and transactions

Iran's foreign debt: $22.07 billion in 2010 ($10.6 billion of short-term debts and $11.4 billion of mid-term and long-term debts).

Iran's deposits in foreign banks: stand at $35 billion while its obligations amount to $25 billion (2007).[83] In 2007, Iran had $62 billion worth of assets held abroad. According to the Bank for International Settlements, Iran's deposits with 39 world banks reached $15.44 billion at the end of March 2012 while its obligations stood at at $10.088 billion.[85] In addition it was reported that Iran had between 10-20 billion dollars held in foreign banks in 2011, allegedly because of payment problems by foreign companies to Iran. According to E.U. sources, despite the European sanctions, Iran has still "several billion euros" deposited in accounts in Germany, Italy, Malta, Spain, Greece and Switzerland (2012). As at 2013, only $30 billion to $50 billion of its foreign exchange reserves (i.e. roughly 50% of total) is accessible because of the international sanctions. Transactions: Foreign transactions with Iran amounted to $150 billion between 2000 and 2007 worth of major contracts and both private and government lines of credit. According to the Bank for International Settlements (BIS), the balance of Iran’s foreign exchange interactions in foreign banks and financial institutes during Q3 2008 stood above $24.3 billion.

Foreign direct investment in Iran

Foreign direct investment in Iran (FDI) has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global competitiveness of 142 countries.[1][2] In 2010, Iran ranked sixth globally in attracting foreign investments.[3]

Foreign investors have concentrated their activity in a few sectors of the economy: the oil and gas industries, vehicle manufacture, copper mining, petrochemicals, foods, and pharmaceuticals. Iran absorbed US$24.3 billion of foreign investment from 1993 to 2007 and US$34.6 billion for 485 projects from 1992 to 2009.

FDI statisticsFirms from over 50 countries have invested in Iran in the past 16 years (1992–2008), with Asia and Europe receiving the largest share, as follows

Amount of FDI

Stock of FDI in Iran equaled $16.82 billion (at home) and $2.075 billion (abroad) according to the World Factbook statistics in 2010.

According to the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) in Iran hit a new record in 2010 and surpassed 3.6 billion dollars despite sanctions imposed on the Islamic Republic.[11] The EIU estimates that Iran's net FDI flow will rise by 100 per cent within the next four years (2010-14).[12] The Economist estimates that FDI (net inflow) in Iran was $1.4 billion in 2011 (equivalent to 0.3% of GDP) down from $3.2 billion in 2010. The report forecasts this figure for 2012 to fall to $1.25 billion, but increase again for the next 3 years and to reach $1.8 billion in 2015.[13] The Government of Iran says planned FDI in 2011 was $4.3 billion and planned FDI will reach $8-10 bilion in 2012-13.

Bushehr and Khuzestan provinces enjoy the highest volume of foreign investment which mostly goes for oil and gas sectors. In 2012, provinces of Fars, Gilan, Tehran, Kerman, Mazandaran and West Azerbaijan ranked first to sixth place in attracting foreign investment in the country.

According to the Government of Iran, Iran needs up to $300 billion in foreign direct investment to meet the objectives of its Five-Year Economic Development Plan (2010-2015), and reach eight percent economic growth rate.[16] Turning to "Vision 2025", the plan has set an investment target of $3.7 trillion within two decades (2005-2025) of which $1.3 trillion should be in the form of foreign investment.

Foreign direct investment in Iran, net inflow. Foreign investment plans in Iran amounted to $4.3 billion in 2011, showing an 11% growth year-over-year.

International sanctions

After the Iranian Revolution in 1979, the United States ended its economic and diplomatic ties with Iran, banned Iranian oil imports and froze approximately $11 billion of its assets. In 1996, the U.S. Government passed the Iran and Libya Sanctions Act (ILSA) which prohibits U.S. (and non-U.S.) companies from investing and trading with Iran in amounts of more than $20 million annually. Since 2000 exceptions to this restriction have been made for items including pharmaceuticals and medical equipment.

Iran's nuclear program has been the subject of contention with the West since 2006 over suspicions of its intentions. The UN Security Council imposed sanctions against select companies linked to the nuclear program, thus furthering the country's economic isolation.[34] Sanctions notably bar nuclear, missile and many military exports to Iran and target investments in oil, gas and petrochemicals, exports of refined petroleum products, as well as the Iranian Revolutionary Guard Corps, banks, insurance, financial transactions and shipping.[270] In 2012 the European Union tightened its own sanctions by joining the three decade-old US oil embargo against Iran.

Effects

According to Undersecretary of State William Burns, Iran may be losing as much as $60 billion annually in energy investment. Sanctions are making imports 24% more costly on average. In addition, the latest round of sanctions could cost Iran annually $50 billion in lost oil revenues. Iran is increasingly using barter trade because its access to the international dollar payment system has been denied. According to Iranian officials, large-scale withdrawal by international companies represents an "opportunity" for domestic companies to replace them.

The IEA estimated that Iranian exports fell to a record of 860,000 bpd in September 2012 from 2.2 million bpd at the end of 2011. This fall led to a drop in revenues and clashes on the streets of Tehran when the local currency, the rial, collapsed. September 2012 output was Iran's lowest since 1988. The U.S. Energy Department has warned that imposing oil embargoes on Iran would increase world oil prices by widening the gap between supply and demand. According to the U.S. Iran could reduce the world price of crude petroleum by 10%, saving the United States annually $76 billion (at the proximate 2008 world oil price of $100/bbl). Opening Iran’s market place to foreign investment could also be a boon to competitive U.S. multinational firms operating in a variety of manufacturing and service sectors.

IRAN AND EU

Trade with Iran is subject to the EU general import regime, since Iran is not a member of the WTO and there is no bilateral agreement between the EU and Iran. Iran applied to join the WTO in 1996, but there has been no agreement at the WTO to start the accession process.

Trade with Iran is subject to certain restrictions derived from the sanctions imposed by the United Nations Security Council (UNSC) on Iran through UNSCR 1737 of 23 of December 2006, UNSCR 1747 of March 2007, UNSCR 1803 of March 2008 and UNSCR 1929 of June 2010. EU trade restrictions with Iran are regulated by Council Regulations 423/2007, 618/2007 and 1110/2008, which set out a list of products prohibited from export to Iran.

In July 2010, following the European Council declaration on Iran in 2010 relating to new restrictive measures, the EU  adopted on 26 July 2010 a Decision that introduced additional sanctions against Iran, as well as a subsequent CFSP Decision and Commission Regulation (March 2012). This regulatory framework is continuously updated.

Subject to the conditions set out by the EU sanctions regime, EU trade with Iran is in principle still legal, but is  in practice affected by different restrictions.

Review of Iran's successive economic plans (1991-201