(Last updated: 05 Jun 2009)

Current business situation

United Nations Security Council and Australian sanctions - Iran

Australia has implemented fully into Australian law decisions of the United Nations Security Council (UNSC) to impose targeted trade and financial sanctions in relation to Iran that are binding on all States. These decisions may be found in UNSC resolutions 1737 of 23 December 2006, 1747 of 24 March 2007 and 1803 of 3 March 2008.

You should be aware that prohibitions under UNSC sanctions may apply extraterritorially to Australian citizens and Australian-incorporated companies overseas.

On 15 October 2008 the Government announced additional Australian sanctions in relation to Iran in support of UNSC resolutions. As a result of these new measures, the Government will not provide new financial support for trade with Iran under Australia’s trade promotion and trade finance programs, namely the Export Finance Insurance Corporation (EFIC) and Export Market Development Grants.

If you are considering commercial or other dealings with Iran we recommend that you familiarise yourself with the operation of the sanctions regime. We also recommend you obtain independent legal advice before making commercial decisions involving trade with Iran.

For more information about UNSC sanctions implemented by Australia in relation to Iran, please go to the Department of Foreign Affairs and Trade (DFAT) website: www.dfat.gov.au/un/unsc_sanctions/iran.html

Information on additional sanctions implemented by Australia in relation to Iran can also be found on the DFAT website: www.dfat.gov.au/un/unsc_sanctions/iran_autonomous_sanctions.html

Detailed information on the export of defence and dual-use goods can be viewed at the Department of Defence’s Defence Export Control Office website: http://www.defence.gov.au/strategy/deco/

For more information about UNSC and autonomous sanctions currently in effect, please see: www.dfat.gov.au/un/unsc_sanctions/index.html.

DFAT provides advice for business travellers and tourists going to Iran. This is regularly updated, and should be checked before planning travel.

Country facts

Capital city:	Tehran
Surface area:	1,648,000 sq km
Population:	71.7 million
Official language(s):	Farsi (Persian)
Head of State & Head of Government:	President HE Dr Mahmoud Ahmadinejad
Australian exports to Iran:	A$164 million
Australian imports from Iran:	A$54 million
Iran's principal export destinations:	Japan, Italy, France
Iran's principal import sources:	China, France, India

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Economic climate

According to the most recent Economist Intelligence Unit (EIU) Country Report, the decisive conservative victory in the February 2004 parliamentary elections, followed by the election of Mahmoud Ahmadinejad to the presidency in June 2005 effectively ended Iran’s reformist movement. The new economic policy is based on populist fiscal expansion, increased public spending and sub-inflationary lending.

The conservative-dominated seventh Majlis (parliament) has rejected the economically liberal elements of the 2005–09 five-year plan, which the reformist-dominated sixth Majlis had passed. These measures had sought to cut state subsidies, reduce state dominance of the economy and encourage foreign investment.

Though the private sector, including international investors, made some headway into the market during the Rafsanjani (1989–97) and Khatami (1997–2005) administrations, major sectors (such as oil and gas, transport, telecommunications, industry, banking and finance) remain overwhelmingly under the purview of the state and its entities. Moreover, it would appear that President Ahmadinejad would  share the reluctance of the present Majlis towards privatisation and foreign investment.

President Ahmadinejad has promoted populist policies, promising to re-distribute the Iranian oil wealth more expansively and to eliminate corruption in the government. There has been a sweeping purge of the bureaucracy, including replacing the heads of state-owned banks, regional governors and diplomats with conservative allies. The president has also committed the government to funding public-sector projects and charitable initiatives.

On 6 January 2008, the president presented his budget for the Iranian calendar year 1387 (fiscal 2008-09) to the Majlis. The US$289 billion budget is a 17 per cent increase on the previous year’s budget. The president has encountered opposition from both reformist and conservative MPs for his economic performance, particularly inflation. The 2008-09 budget was based on a conservative oil revenue assumption of US$39.70 a barrel.

Key economic indicators and statistics 2008:

• GDP – US$382.3 billion
• GDP per capita – US$5,247
• Real GDP growth – 5.5 per cent
• Inflation – 24 per cent

The key factors affecting goods and services demand are:

• Demographic shift: almost 50 per cent are under 20 years of age and 70 per cent are aged under 30 years.
• Rising unemployment, issues on underemployment and loss of buying power.
• Increasing migration from rural areas, thereby causing pseudo-urbanisation and underground economic activities.
• Weakening middle-class.
• Increasing pseudo-Westernisation and demand for foreign products, not supported by marketing techniques such as market research or advertising to build brand loyalty in a systematic way.
• Lack of transparent distribution systems.

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)

Political climate

Two determinant events have profoundly affected Iran's recent political history. The 1979 Islamic revolution and the eight years Iran-Iraq war. The 1979 revolution marked the end of 2500 years of absolute monarchical power and gave birth to Iran's first democratically elected Parliament. However, the Islamic Republic of Iran has developed its own government structure and decision-making process.

Political parties do not currently form the basis of parliamentary activity. Most Majlis (Parliamentary) candidates are independent, although identifiable as sympathetic to certain factions. Parliamentary and Presidential elections are held every four years.

The Majlis-e-Shuray-e Islami (National Assembly) consists of 290 elected members. All Majlis candidates must be endorsed by the Council of Guardians to gain eligibility. Six of the 12-member Council of Guardians, are appointed by the Rahbar (religious supreme leader) and six by the Majlis. A fourth 35-member government institution, the Expediency Council, is appointed by the Supreme Leader and mediates between the Majlis and the Council of Guardians.

The Council also scrutinises candidates standing for election to national office. The Supreme Leader, the Council of Guardians and the Expediency Council all have overruling rights in the legislative process.

Trade relations and statistics

Iran has historically been at the crossroad between Europe and Asia, with the famous Silk Road passing through the country. Iran’s strategic position became even more important following the discovery of oil, and later as a major ally of the USA during the cold war. The country has also played a major role in the context of the Arab-Israeli conflict.

According to the Economist Intelligence Unit (EIU), oil earnings have historically dominated Iran’s external trade, currently generating around 80 per cent of revenue, although non-oil exports have begun to rise.

Import spending has also risen quickly, as high foreign exchange earnings and an easing of Iran’s debt repayment schedule have allowed the central bank to relax its import compression program.

Major Australian exports to Iran (2007-08):

• Coal – A$46 million
• Passenger motor vehicles – A$36 million 
• Barley – A$19 million 
• Medicaments (including veterinary) – A$6 million

Major Australian imports from Iran (2007-08):

• Inorganic chemical elements – A$12 million
• Fruit and nuts – A$12 million 
• Floor coverings – A$9 million
• Lime, cement and construction materials – A$4 million

(Source: Department of Foreign Affairs and Trade - Country economic fact sheet)