Overview

Iran

IRAN, WHAT TO EXPECT SIX MONTHS AFTER THE AMERICAN ELECTIONS?

The nuclear deal promised to unblock the full economic and commercial potential of Iran but So far, this potential has not yet been achieved. Italian exports to Iran grow but below expectations and without sector diversification.

Iran, what to expect six months after the american elections?
IRAN’S POTENTIAL STILL HAS TO BE DEPLOYED

The nuclear deal promised to unblock the full economic and commercial potential of Iran.

  • The estimates for Italy foresaw an increase of Italian exports to the country for nearly 3 billion euros in the 2015-2018 period, with total exports of 1.7 billion euros already in 2016 (Source: SACE, 2016).
  • Iran expected a robust contribution to economic growth from international investments (ambitious growth objective: +8% GDP annually in the three-year period 2017-2020).

So far, this potential has not yet been achieved:

  • Iranian real GDP in 2017 is forecast to grow by 4.1% (Source: IMF, 2017), lower than the 4.5% of 2016 and far below the expected +8%. Iran affirms it has approved FDI for 12 billion euros (8 in the Oil&Gas sector alone). Many of these are Memorandums of Understanding (MOUs), however, which must still be finalized.
  • Constraints linked to remaining sanctions and moral suasion on the part of the U.S., together with the fear of a “snap-back” of sanctions, have acted as a brake on Italian and European banks’ financing of large investment projects in Iran.
  • Operators are currently awaiting the developments linked to Trump’s victory and to the results of the imminent presidential elections in Iran.
ITALIAN EXPORTS TO IRAN GROW MORE THAN ITS EUROPEAN COMPETITORS, BUT BELOW EXPECTATIONS AND WITHOUT SECTOR DIVERSIFICATION

Considering the value of exports, Italy remains the second EU partner of Iran. In 2016 Italian exports to the country registered a +28% over 2015, for a volume of €1.5 bln (against a prevision of €1.7 bln). In the EU, only Germany is doing better, with €2.6 bln in 2016 (+26% vs. 2015).

However, the growth of exports is not accompanied by adequate sector diversification.

Industrial machinery, with over €880 mln in exports in 2016, account for some 60% of Italian exports to Iran, followed by electrical appliances (7%), medical devices (4%), plastics (3%) and vehicles (3%).

ITALY IS THE SECOND EUROPEAN MARKET FOR IRAN THANKS TO THE IMPORTANCE OF OIL&GAS

2016 recorded +225% in imports from Iran (467 million € in 2015 compared to 1,051 million € in 2016) thanks to the lifting of international sanctions.

  • The increase in imports is almost entirely due to the importation of oil products, which in 2016 made up 67% of total imports, against 8% the previous year.
  • Excluding the extractive sector (Oil&Gas in particular), imports from Iran decreased by 19.8% compared to 2015.
  • Like for exports, therefore, the increase in imports was not accompanied by an organic, cross-sector expansion of bilateral trade.
  • Italy is the second European partner by value of imports, behind France (1.35 billion € for France as against the 1.05 billion recorded by Italy in 2016).

THREE UNKNOWNS CAST SHADOWS ON THE FUTURE OF ITALIAN-IRANIAN RELATIONS

Newly elected President Trump displays a wavering attitude toward Iran. One example is the signing of new sanctions on 25 natural and legal persons in relation to missile tests conducted by Iran in early 2017. Military interventionism in Syria adds an element of complexity to a geopolitical panorama that is hard to read.

The upcoming Iranian elections see Rouhani in the lead. The biggest unknowns relate to a cooling of enthusiasm following the nuclear deal and the death of a precious political ally, Hashemi Rafsanjani.

On the Italian front, the Iran dossier has encountered problems also because of the Italian political situation. The risk is that Italy and its companies lose the advantage and positions gained in Iran compared to the international competition.


Find out more:

Iran-Italy Summit


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