Abstract
There is still a confused picture over Iran' s nuclear status. Iran is not
cooperating with the wishes of the
broad international community regarding
clarification of their uncertain nuclear ambitions, and curbing
the
potential creation of any nuclear weapons. Iran is widely suspected of
developing nuclear capabilities,
in part for weapons manufacture. The
International Atomic Energy Agency (IAEA) has stated that Iran' s
uranium
would still require further enrichment if it were to be used to make a bomb.
The IAEA has also
stated that Iran has slowed down its centrifuge
expansion program for ' political' reasons. An upcoming
presidential
election in Iran in June 2009 could change the picture.
The major domestic
political event of 2009 will be the presidential elections, which are
scheduled for
June 12. We expect the conservative incumbent, President
Mahmoud Ahmadinejad, to seek re-election to
a second term, although at the
time of writing he had not yet announced his candidacy. The defining issue
of the election is likely to be the state of the domestic economy. Indeed, a
November 2008 BBC poll of
over 4,000 Iranians found that residents thought
that unemployment, poverty and high inflation were
Iran' s biggest issues,
with only a small minority flagging up the country' s hostile relations with
the US or
the need for political reform. In light of our expectations for
economic conditions to worsen over the
coming year, these views are
unlikely to change significantly by the time that June' s polls come round
As regards US policy to Iran under the administration of newly-elected
President Barack Obama, we do
not foresee a dramatic shift from the
policies of the Bush administration. Thus, we are not expecting a
US-Iranian military conflict. Obama ' supports tough and direct diplomacy with
Iran without
preconditions' (according to the White House website), and
his main foreign policy goal will be to make
sure that the Islamic
Republic is prevented from developing nuclear weapons. While Iran contends
that its
nuclear programme is for civilian purposes only, if it continues
to engender US suspicions by being less
than totally transparent, the US
is likely to continue pushing for harsher sanctions on the Islamic
Republic. Indeed, the White House website also states that: ' If Iran continues
its troubling behaviour, we
will step up our economic pressure and
political isolation.' It is our long-held view that the nuclear stand
off
will be settled peacefully, and with the Iranian economy set to weaken over
the coming year, Tehran
may conclude that the costs of international
isolation outweigh the benefits of maintaining its nuclear
ambitions.
Even though our growth forecasts might seem rather bearish, we believe that
risks still remain to the
downside, and that in a worst-case scenario,
Iran could enter into a technical recession at some stage in
2009 or 2010.
As mentioned above, our current global growth forecast might still be too
optimistic, and in
the event that the global economy contracts in 2009,
average oil prices could fail to meet our
expectations, which would
consequently hurt Iran' s growth prospects further.
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