Economy of Iran

Expansion of public healthcare and international relations are the other main objectives of the fifth plan, an ambitious series of measures that include subsidy reform, banking recapitalization, currency, taxation, customs, construction, employment, nationwide goods and services distribution, social justice and productivity.[84] The intent is to make the country self-sufficient by 2015 and replace the payment of $100 billion in subsidies annually with targeted social assistance.[85][86][87][88] These reforms target the country's major sources of inefficiency and price distortion and are likely to lead to major restructuring of almost all economic sectors.[86] As such, by removing energy subsidies, Iran intends to make its industries more efficient and competitive.[89] By 2016, one third of Iran's economic growth is expected to originate from productivity improvement. Energy subsidies left the country one of the world's least energy-efficient, with energy intensity three times the global average and 2.5 times higher than the Middle Eastern average.[90] Notwithstanding its own issues, the banking sector is seen as a potential hedge against the removal of subsidies, as the plan is not expected to directly impact banks.[91]

The Islamic Revolutionary Guard Corps (IRGC) are thought to control about one third of Iran's economy through subsidiaries and trusts.[152][153][154] Estimates by the Los Angeles Times suggest IRGC has ties to over one hundred companies and annual revenue in excess of $12 billion, particularly in construction.[155] The Ministry of Petroleum awarded IRGC billions of dollars in no-bid contracts as well as major infrastructure projects.[156] Tasked with border control, IRGC maintains a monopoly on smuggling, costing Iranian companies billions of dollars each year.[152] Smuggling is encouraged in part by the generous subsidization of domestic goods (including fuel). IRGC also runs the telecommunication company, laser eye-surgery clinics, makes cars, builds bridges and roads and develops oil and gas fields.[157]

Welfare programs for the needy are managed by more than 30 public agencies alongside semi-state organizations known as bonyads, together with several private non-governmental organizations. Bonyads are a consortium of over 120 tax-exempt organizations that receive subsidies and religious donations. They answer directly to the Supreme Leader of Iran and control over 20% of GDP.[152][158] Operating everything from vast soybean and cotton farms to hotels, soft drink, automobile manufacturing, and shipping lines, they are seen as overstaffed, corrupt and generally unprofitable.[159] Bonyad companies also compete with Iran's unprotected private sector, whose firms complain of the difficulty of competing with the subsidized bonyads.[159] Bonyads are not subject to audit or Iran's accounting laws.[160] Setad is a multi-sector business organization, with holdings of 37 companies, and an estimated value of $95 billion. It is under the control of the Supreme Leader, Ali Khamenei, and created from thousands of properties confiscated from Iranians.[161]

Unemployment rate, per-capita income growth and minimum wage (2000–2009)

GNI per capita:

  Iran in 2010: $4,520 nominal; (2012: $13,000 PPP)[169]

  Higher GNI per capita compared to Iran

  Lower GNI per capita compared to Iran

Iran is classed as a middle income country and has made significant progress in provision of health and education services in the period covered by the Millennium Development Goals (MDGs). In 2010, Iran's average monthly income was about $500 (GNI per capita in 2012: $13,000 by PPP).[39][169][170][171] A minimum national wage applies to each sector of activity as defined by the Supreme Labor Council. In 2009 this was about $263 per month ($3,156 per year).[172] The World Bank reported that in 2001, approximately 20% of household consumption was spent on food, 32% on fuel, 12% on health care and 8% on education.[173] Iranians have little debt.[174] Seventy percent of Iranians own their homes.[175]

According to the Statistical Center of Iran, median household income of Iran in the fiscal year of 2018–2019 was 434,905,000 rials (a bit above $3,300), an 18.6% rise from the previous yearlong period of 2017–2018, where median household income was about 366,700,000 rials. Adjusted for purchasing power parity, Iran's 2017–2018 median income was equivalent to about $28,647 (2017 conversion factor, private consumption, LCU).[176] As the average Iranian household size is 3.5, this puts median personal income at around $8,185.[177] While Iran rates relatively well on income, median wealth is very low for its income level (on par with Vietnam or Djibouti), indicating a high level of spending. According to SCI, median household spending in the FY 2018 was 393,227,000 rials, or 90.5% of the median household income of 434,905,000 rials.

After the Revolution, the composition of the middle class in Iran did not change significantly, but its size doubled from about 15% of the population in 1979 to more than 32% in 2000.[178] The official poverty line in Tehran for the year ending March 20, 2008, was $9,612, while the national average poverty line was $4,932.[179] In 2010, Iran's Department of Statistics announced that 10 million Iranians live under the absolute poverty line and 30 million live under the relative poverty line.[180]

Although Iran does not offer universal social protection, in 1996, the Iranian Center for Statistics estimated that more than 73% of the Iranian population was covered by social security.[181] Membership of the social security system for all employees is compulsory.[182]

Social security ensures employee protection against unemployment, disease, old age and occupational accidents.[183] In 2003, the government began to consolidate its welfare organizations to eliminate redundancy and inefficiency. In 2003 the minimum standard pension was 50% of the worker's earnings but no less than the minimum wage.[183] Iran spent 22.5% of its 2003 national budget on social welfare programs of which more than 50% covered pension costs.[184] Out of the 15,000 homeless in Iran in 2015, 5,000 were women.[185]

Employees between the age of 18 and 65 years are covered by the social security system with financing shared between the employee (7% of salary), the employer (20–23%) and the state, which in turn supplements the employer contribution up to 3%.[186] Social security applies to self-employed workers, who voluntarily contribute between 12% and 18% of income depending on the protection sought.[183] Civil servants, the regular military, law enforcement agencies, and IRGC have their own pension systems.[187]

Although Iranian workers have a theoretical right to form labor unions, there is no union system in the country. Ostensible worker representation is provided by the Workers' House, a state-sponsored institution that attempts to challenge some state policies.[188] Guild unions operate locally in most areas, but are limited largely to issuing credentials and licenses. The right to strike is generally not respected by the state. Since 1979 strikes have often been met by police action.[189]

A comprehensive law covers labor relations, including hiring of foreign workers. This provides a broad and inclusive definition of the individuals it covers, recognizing written, oral, temporary and indefinite employment contracts. Considered employee-friendly, the labor law makes it difficult to lay off staff. Employing personnel on consecutive six-month contracts (to avoid paying benefits) is illegal, as is dismissing staff without proof of a serious offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee.[182]

Wheat, the most important crop, is grown mainly in the west and northwest whilst rice is the major crop in the Caspian region.

Agriculture contributes 9.5% to the gross domestic product and employs 17% of the labor force.[46] About 9% of Iran's land is arable,[190] with the main food-producing areas located in the Caspian region and in northwestern valleys. Some northern and western areas support rain-fed agriculture, while others require irrigation.[191] Primitive farming methods, overworked and under-fertilized soil, poor seed and water scarcity are the principal obstacles to increased production. About one third of total cultivated land is irrigated. Construction of multipurpose dams and reservoirs along rivers in the Zagros and Alborz mountains have increased the amount of water available for irrigation. Agricultural production is increasing as a result of modernization, mechanization, improvements to crops and livestock as well as land redistribution programs.[192]

Wheat, the most important crop, is grown mainly in the west and northwest. Rice is the major crop in the Caspian region. Other crops include barley, corn, cotton, sugar beets, tea, hemp, tobacco, fruits, potatoes, legumes (beans and lentils), vegetables, fodder plants (alfalfa and clover), almonds, walnuts and spices including cumin and sumac. Iran is the world's largest producer of saffron, pistachios, honey, berberis and berries and the second largest date producer.[193] Meat and dairy products include lamb, goat meat, beef, poultry, milk, eggs, butter, and cheese.

Non-food products include wool, leather, and silk. Forestry products from the northern slopes of the Alborz Mountains are economically important. Tree-cutting is strictly controlled by the government, which also runs a reforestation program. Rivers drain into the Caspian Sea and are fished for salmon, carp, trout, pike, and sturgeon that produce caviar, of which Iran is the largest producer.[192][194]

Since the 1979 revolution, commercial farming has replaced subsistence farming as the dominant mode of agricultural production. By 1997, the gross value reached $25 billion.[65] Iran is 90% self-sufficient in essential agricultural products, although limited rice production leads to substantial imports. In 2007 Iran reached self-sufficiency in wheat production and for the first time became a net wheat exporter.[195] By 2003, a quarter of Iran's non-oil exports were of agricultural products,[196] including fresh and dried fruits, nuts, animal hides, processed foods, and spices.[65] Iran exported $736 million worth of foodstuffs in 2007 and $1 billion (~600,000 tonnes) in 2010.[197] A total of 12,198 entities are engaged in the Iranian food industry, or 12% of all entities in the industry sector. The sector also employs approximately 328,000 people or 16.1% of the entire industry sector's workforce.[198]

Iran has a diversified and broad industrial base. In 1998, the United Nations classified Iran's economy as "semi-developed".

Large-scale factory manufacturing began in the 1920s. During the Iran–Iraq War, Iraq bombed many of Iran's petrochemical plants, damaging the large oil refinery at Abadan bringing production to a halt. Reconstruction began in 1988 and production resumed in 1993. In spite of the war, many small factories sprang up to produce import-substitution goods and materials needed by the military.[199]

Iran's major manufactured products are petrochemicals, steel and copper products. Other important manufactures include automobiles, home and electric appliances, telecommunications equipment, cement and industrial machinery. Iran operates the largest operational population of industrial robots in West Asia.[200] Other products include paper, rubber products, processed foods, leather products and pharmaceuticals. In 2000, textile mills, using domestic cotton and wool such as Tehran Patou and Iran Termeh employed around 400,000 people around Tehran, Isfahan and along the Caspian coast.[201][202]

Giant Fractionating column manufactured by Machine Sazi Arak (MSA)

A 2003 report by the United Nations Industrial Development Organization regarding small and medium-sized enterprises (SMEs)[162] identified the following impediments to industrial development:

• Lack of monitoring institutions;
• Inefficient banking system;
• Insufficient research & development;
• Shortage of managerial skills;
• Corruption;
• Inefficient taxation;
• Socio-cultural apprehensions;
• Absence of social learning loops;
• Shortcomings in international market awareness necessary for global competition;
• Cumbersome bureaucratic procedures;
• Shortage of skilled labor;
• Lack of intellectual property protection;
• Inadequate social capital, social responsibility and socio-cultural values.

Despite these problems, Iran has progressed in various scientific and technological fields, including petrochemical, pharmaceutical, aerospace, defense, and heavy industry. Even in the face of economic sanctions, Iran is emerging as an industrialized country.[203]

Persian carpet

Iran has a long tradition of producing artisanal goods including Persian carpets, ceramics, copperware, brassware, glass, leather goods, textiles and wooden artifacts. The country's carpet-weaving tradition dates from pre-Islamic times and remains an important industry contributing substantial amounts to rural incomes. An estimated 1.2 million weavers in Iran produce carpets for domestic and international export markets. More than $500 million worth of hand-woven carpets are exported each year, accounting for 30% of the 2008 world market.[204][205] Around 5.2 million people work in some 250 handicraft fields and contribute 3% of GDP.

Iran Khodro is the largest car manufacturer in the Middle-East. It has established joint-ventures with foreign partners on 4 continents.

As of 2001, 13 public and privately owned automakers within Iran, led by Iran Khodro and Saipa that accounted for 94% of domestic production. Iran Khodro's Paykan, replaced by the Samand in 2005, is the predominant brand. With 61% of the 2001 market, Khodro was the largest player, whilst Saipa contributed 33% that year. Other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro and others accounted for the remaining 6%.[206] These automakers produce a wide range of vehicles including motorbikes, passenger cars such as Saipa's Tiba, vans, mini trucks, medium-sized trucks, heavy trucks, minibuses, large buses and other heavy automobiles used for commercial and private activities in the country. In 2009 Iran ranked fifth in car production growth after China, Taiwan, Romania and India.[207] Iran was the world's 12th biggest automaker in 2010 and operates a fleet of 11.5 million cars.[208][209][210][211] Iran produced 1,395,421 cars in 2010, including 35,901 commercial vehicles.

In 2007 the International Institute for Strategic Studies estimated Iran's defense budget at $7.31 billion, equivalent to 2.6% of GDP or $102 per capita, ranking it 25th internationally. The country's defense industry manufactures many types of arms and equipment. Since 1992, Iran's Defense Industries Organization (DIO) has produced its own tanks, armored personnel carriers, guided missiles, radar systems, guided missile destroyers, military vessels, submarines and fighter planes.[212] In 2006 Iran exported weapons to 57 countries, including NATO members, and exports reached $100 million.[213][214] It has also developed a sophisticated mobile air defense system dubbed as Bavar 373.[215]

HEPCO motor grader (HG180D1) is working on road construction

Until the early 1950s construction remained in the hands of small domestic companies. Increased income from oil and gas and easy credit triggered a building boom that attracted international construction firms to the country. This growth continued until the mid-1970s when a sharp rise in inflation and a credit squeeze collapsed the boom. The construction industry had revived somewhat by the mid-1980s, although housing shortages and speculation remained serious problems, especially in large urban centers. As of January 2011, the banking sector, particularly Bank Maskan, had loaned up to 102 trillion rials ($10.2 billion) to applicants of Mehr housing scheme.[216] Construction is one of the most important sectors accounting for 20–50% of total private investment in urban areas and was one of the prime investment targets of well-off Iranians.[184]

Annual turnover amounted to $38.4 billion in 2005 and $32.8 billion in 2011.[217][218] Because of poor construction quality, many buildings need seismic reinforcement or renovation.[219] Iran has a large dam building industry.[220]

Mobarakeh in Isfahan is Iran's largest steel mill listed on the Tehran Stock Exchange.[221]

Mineral production contributed 0.6% of the country's GDP in 2011, a figure that increases to 4% when mining-related industries are included. Gating factors include poor infrastructure, legal barriers, exploration difficulties, and government control over all resources.[222] Iran is ranked among the world's 15 major mineral-rich countries.[223]

Although the petroleum industry provides the majority of revenue, about 75% of all mining sector employees work in mines producing minerals other than oil and natural gas.[65] These include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, strontium, silica, uranium, and gold, the latter of which is mainly a by-product of the Sar Cheshmeh copper complex operation.[224] The mine at Sar Cheshmeh in Kerman Province is home to the world's second largest store of copper.[225] Large iron ore deposits exist in central Iran, near Bafq, Yazd and Kerman. The government owns 90% of all mines and related industries and is seeking foreign investment.[222] The sector accounts for 3% of exports.[222]

In 2019, the country was the 2nd largest world producer of gypsum;[226] the 8th largest world producer of molybdenum;[227] the world's 8th largest producer of antimony;[228] the 11th largest world producer of iron ore;[229] the 18th largest world producer of sulfur,[230] in addition to being the 21st largest worldwide producer of salt.[231] It was the 13th largest producer in the world of uranium in 2018.[232]

Iran has recoverable coal reserves of nearly 1.9 billion short tonnes. By mid-2008, the country produced about 1.3 million short tonnes of coal annually and consumed about 1.5 million short tonnes, making it a net importer.[233] The country plans to increase hard-coal production to 5 million tons in 2012 from 2 million tons in November 2008.[234]

The main steel mills are located in Isfahan and Khuzestan. Iran became self-sufficient in steel in 2009.[235] Aluminum and copper production are projected to hit 245,000 and 383,000 tons respectively by March 2009.[234][236] Cement production reached 65 million tons in 2009, exporting to 40 countries.[236][237]

Iran's refining capacity (2007–2013 est.)

Iran manufactures 60–70% of its equipment domestically, including refineries, oil tankers, drilling rigs, offshore platforms, and exploration instruments.[238][239][240][241]

Based on a fertilizer plant in Shiraz, the world's largest ethylene unit, in Asalouyeh, and the completion of other special economic zone projects, Iran's exports in petrochemicals reached $5.5 billion in 2007, $9 billion in 2008 and $7.6 billion during the first ten months of the Iranian calendar year 2010.[242] National Petrochemical Company's output capacity will increase to over 100 million tpa by 2015 from an estimated 50 million tpa in 2010 thus becoming the world' second largest chemical producer globally after Dow Chemical with Iran housing some of the world's largest chemical complexes.[110]

Giant gas reactor of Yadavaran gas refinery designed and manufactured by AzarAb Industries Corporation

Major refineries located at Abadan (site of its first refinery), Kermanshah and Tehran failed to meet domestic demand for gasoline in 2009. Iran's refining industry requires $15 billion in investment over the period 2007–2012 to become self-sufficient and end gasoline imports.[243] Iran has the fifth cheapest gasoline prices in the world leading to fuel smuggling with neighboring countries.[244]

In November 2019, Iran raised the gasoline prices by 50% and imposed a strict rationing system again (as in 2007). The prices per liter gasoline rose to 15,000 rials, where only 60 liters were permitted to private cars for a month. Besides, oil purchase beyond the limit would cost 30,000 rials per liter. Those prices are still well below target prices set in the subsidy reform plan, however. The policy changes came in effect to the US sanctions, and caused protests across the country.[245] The result of the rationing, a year later, was reduced pollution and wasteful domestic consumption and increase in exports.[246]

Despite 1990s efforts towards economic liberalization, government spending, including expenditure by quasi-governmental foundations, remains high. Estimates of service sector spending in Iran are regularly more than two-fifths of GDP, much government-related, including military expenditures, government salaries, and social security disbursements.[39] Urbanization contributed to service sector growth. Important service industries include public services (including education), commerce, personal services, professional services and tourism.

The total value of transport and communications is expected to rise to $46 billion in nominal terms by 2013, representing 6.8% of Iran's GDP.[247] Projections based on 1996 employment figures compiled for the International Labour Organization suggest that Iran's transport and communications sector employed 3.4 million people, or 20.5% of the labor force in 2008.[247]

Countries by natural gas proven reserves (2014), based on data from The World Factbook. Iran has the world's second largest reserves after Russia

Iran possesses 10% of the world's proven oil reserves and 15% of its gas reserves.[30] Domestic oil and gas along with hydroelectric power facilities provide power.[30] Energy wastage in Iran amounts to six or seven billion dollars per year,[249] much higher than the international norm.[90] Iran recycles 28% of its used oil and gas, whereas some other countries reprocess up to 60%.[249] In 2008 Iran paid $84 billion in subsidies for oil, gas and electricity.[36] It is the world's third largest consumer of natural gas after United States and Russia.[39] In 2010 Iran completed its first nuclear power plant at Bushehr with Russian assistance.[250]

Iran has been a major oil exporter since 1913. The country's major oil fields lie in the central and southwestern parts of the western Zagros mountains. Oil is also found in northern Iran and in the Persian Gulf. In 1978, Iran was the fourth largest oil producer, OPEC's second largest oil producer and second largest exporter.[251] Following the 1979 revolution the new government reduced production. A further decline in production occurred as result of damage to oil facilities during the Iraq-Iran war. Oil production rose in the late 1980s as pipelines were repaired and new Gulf fields exploited. By 2004, annual oil production reached 1.4 billion barrels producing a net profit of $50 billion.[252] Iranian Central Bank data show a declining trend in the share of Iranian exports from oil-products (FY 2006: 84.9%, 2007/2008: 86.5%, 2008/2009: 85.5%, 2009/2010: 79.8%, FY 2010 (first three quarters): 78.9%).[253] Iranian officials estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once current projects come on stream.[104]

Pipelines move oil from the fields to the refineries and to such exporting ports as Abadan, Bandar-e Mashur and Kharg Island. Since 1997, Iran's state-owned oil and gas industry has entered into major exploration and production agreements with foreign consortia.[254][255] In 2008 the Iranian Oil Bourse (IOB) was inaugurated in Kish Island.[256] The IOB trades petroleum, petrochemicals and gas in various currencies. Trading is primarily in the euro and rial along with other major currencies, not including the US dollar. According to the Petroleum Ministry, Iran plans to invest $500 billion in its oil sector by 2025.[257]

Iran's retail industry consists largely of cooperatives (many of them government-sponsored), and independent retailers operating in bazaars. The bulk of food sales occur at street markets with prices set by the Chief Statistics Bureau. Iran has 438,478 small grocery retailers.[258] These are especially popular in cities other than Tehran where the number of hypermarkets and supermarkets is still very limited. More mini-markets and supermarkets are emerging, mostly independent operations. The biggest chainstores are state-owned Etka, Refah, Shahrvand and Hyperstar Market.[258] Electronic commerce in Iran passed the $1 billion mark in 2009.[259]

In 2012, Iranians spent $77 billion on food, $22 billion on clothes and $18.5 billion on outward tourism.[260] In 2015, overall consumer spending and disposable income are projected at $176.4 billion and $287 billion respectively.[261]

The constitution entitles Iranians to basic health care. By 2008, 73% of Iranians were covered by the voluntary national health insurance system.[262] Although over 85% of the population use an insurance system to cover their drug expenses, the government heavily subsidizes pharmaceutical production/importation. The total market value of Iran's health and medical sector was $24 billion in 2002 and was forecast to rise to $50 billion by 2013.[263][264] In 2006, 55 pharmaceutical companies in Iran produced 96% (quantitatively) of the medicines for a market worth $1.2 billion.[262][265][266] This figure is projected to increase to $3.65 billion by 2013.[264]

Cyrus' tomb lies in Pasargadae. Iran is home to 19 historic sites which have been inscribed on UNESCO World Heritage List.

Although tourism declined significantly during the war with Iraq, it has subsequently recovered. About 1,659,000 foreign tourists visited Iran in 2004 and 2.3 million in 2009 mostly from Asian countries, including the republics of Central Asia, while about 10% came from the European Union and North America.[76][267]

The most popular tourist destinations are Mazandaran, Isfahan, Mashhad and Shiraz.[268] In the early 2000s the industry faced serious limitations in infrastructure, communications, industry standards and personnel training.[191] Several organized tours from Germany, France and other European countries come to Iran annually to visit archaeological sites and monuments. In 2003 Iran ranked 68th in tourism revenues worldwide.[269] According to UNESCO and the deputy head of research for Iran Travel and Tourism Organization (ITTO), Iran is rated among the "10 most touristic countries in the world".[269] Domestic tourism in Iran is one of the largest in the world.[270]

Government loans and credits are available to industrial and agricultural projects, primarily through banks. Iran's unit of currency is the rial which had an average official exchange rate of 9,326 rials to the U.S. dollar in 2007.[39] Rials are exchanged on the unofficial market at a higher rate. In 1979, the government nationalized private banks. The restructured banking system replaced interest on loans with handling fees, in accordance with Islamic law. This system took effect in the mid-1980s.[54]

The Tehran Stock Exchange has been one of the world's best performing stock exchanges in recent years.[271][272]

The banking system consists of a central bank, the Bank Markazi, which issues currency and oversees all state and private banks. Several commercial banks have branches throughout the country. Two development banks exist and a housing bank specializes in home mortgages. The government began to privatize the banking sector in 2001 when licenses were issued to two new privately owned banks.[273]

State-owned commercial banks predominantly make loans to the state, bonyad enterprises, large-scale private firms and four thousand wealthy/connected individuals.[274][275] While most Iranians have difficulty obtaining small home loans, 90 individuals secured facilities totaling $8 billion. In 2009, Iran's General Inspection Office announced that Iranian banks held some $38 billion of delinquent loans, with capital of only $20 billion.

Foreign transactions with Iran amounted to $150 billion of major contracts between 2000 and 2007, including private and government lines of credit.[276] In 2007, Iran had $62 billion in assets abroad.[277] In 2010, Iran attracted almost $11.9 billion from abroad, of which $3.6 billion was FDI, $7.4 billion was from international commercial bank loans, and around $900 million consisted of loans and projects from international development banks.[278]

As of 2010, the Tehran Stock Exchange traded the shares of more than 330 registered companies.[272] Listed companies were valued at $100 billion in 2011.[279]

Insurance premiums accounted for just under 1% of GDP in 2008,[233] a figure partly attributable to low average income per head.[233] Five state-owned insurance firms dominate the market, four of which are active in commercial insurance. The leading player is the Iran Insurance Company, followed by Asia, Alborz and Dana insurances. In 2001/02 third-party liability insurance accounted for 46% of premiums, followed by health insurance (13%), fire insurance (10%) and life insurance (9.9%).[273]

Broadcast media, including five national radio stations and five national television networks as well as dozens of local radio and television stations are run by the government. In 2008, there were 345 telephone lines and 106 personal computers for every 1,000 residents.[280] Personal computers for home use became more affordable in the mid-1990s, since when demand for Internet access has increased rapidly. As of 2010, Iran also had the world's third largest number of bloggers (2010).[281] In 1998, the Ministry of Post, Telegraph & Telephone (later renamed the Ministry of Information & Communication Technology) began selling Internet accounts to the general public. In 2006, revenues from the Iranian telecom industry were estimated at $1.2 billion.[282] In 2006, Iran had 1,223 Internet Service Providers (ISPs), all private sector operated.[283] As of 2014, Iran has the largest mobile market in the Middle East, with 83.2 million mobile subscriptions and 8 million smart-phones in 2012.[284]

According to the World Bank, Iran's information and communications technology sector had a 1.4% share of GDP in 2008.[280] Around 150,000 people work in this sector, including 20,000 in the software industry.[285] 1,200 IT companies were registered in 2002, 200 in software development. In 2014 software exports stood at $400 million. By the end of 2009, Iran's telecom market was the fourth-largest in the Middle East at $9.2 billion and was expected to reach $12.9 billion by 2014 at a compound annual growth rate of 6.9%.[286]

Locomotive production line of Wagon Pars company

Iran has an extensive paved road system linking most towns and all cities. In 2011, the country had 173,000 kilometres (107,000 mi) of roads, of which 73% were paved. In 2007 there were approximately 100 passenger cars for every 1,000 inhabitants.[208] Trains operated on 11,106 kilometres (6,901 mi) of track.[39]

The country's major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving in Iran, imported goods are distributed by trucks and freight trains. The Tehran–Bandar-Abbas railroad, opened in 1995, connects Bandar-Abbas to Central Asia via Tehran and Mashhad. Other major ports include Bandar Anzali and Bandar Torkaman on the Caspian Sea and Khoramshahr and Bandar Imam Khomeini on the Persian Gulf. Dozens of cities have passenger and cargo airports. Iran Air, the national airline, was founded in 1962 and operates domestic and international flights. All large cities have bus transit systems and private companies provide intercity bus services. Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Isfahan are constructing underground railways. More than one million people work in the transportation sector, accounting for 9% of 2008 GDP.[287]

In August 2022, President Ebrahim Raisi’s cabinet approved a law to import fully assembled foreign cars. His predecessor President Hassan Rouhani, had outlawed such imports in July 2018 due to sanctions imposed on Iran. Regular Iranian citizens were unable to buy safe cars at affordable prices.[288]

FDI stock in Iran (1980–2010)

In the 1990s and early 2000s, indirect oilfield development agreements were made with foreign firms, including buyback contracts in the oil sector whereby the contractor provided project finance in return for an allocated production share. Operation transferred to National Iranian Oil Company (NIOC) after a set number of years, completing the contract.[304]

Unfavorable or complex operating requirements and international sanctions have hindered foreign investment in the country, despite liberalization of relevant regulations in the early 2000s. Iran absorbed $24.3 billion of foreign investment between the Iranian calendar years 1993 and 2007.[305] The EIU estimates that Iran's net FDI will rise by 100% between 2010 and 2014.[306]

Foreign investors concentrated their activities in the energy, vehicle manufacture, copper mining, construction, utilities, petrochemicals, clothing, food and beverages, telecom and pharmaceuticals sectors. Iran is a member of the World Bank's Multilateral Investment Guarantee Agency.[307] In 2006, the combined net worth of Iranian citizens abroad was about 1.3 trillion dollars.[308]

According to the head of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), in 2008 Iran ranked 142 among 181 countries in working conditions. Iran stands at number 96 in terms of business start-ups, 165 in obtaining permits, 147 in employment, 147 in asset registration, 84 in obtaining credit, 164 in legal support for investments, 104 in tax payments, 142 in overseas trade, 56 in contract feasibility and 107 in bankruptcy.[309] Firms from over 50 countries invested in Iran between 1992 and 2008, with Asia and Europe the largest participants as shown below:[310]

The economic impact of a partial lifting of sanctions extends beyond the energy sector; The New York Times reported that "consumer-oriented companies, in particular, could find opportunity in this country with 81 million consumers, many of whom are young and prefer Western products".[311] The consumer-goods market is expected to grow by $100 billion by 2020.[312] Iran is considered "a strong emerging market play" by investment and trading firms.[313] Opening Iran's market place to foreign investment could also be a boon to competitive multinational firms operating in a variety of manufacturing and service sectors, worth $600 billion to $800 billion in new investment opportunities over the next decade.[314][315][316][317]

Map of the Economic Cooperation Organization (ECO) member states

Iran has held observer status at the World Trade Organization (WTO) since 2005. Although the United States has consistently blocked its bid to join the organization, observer status came in a goodwill gesture to ease nuclear negotiations between Iran and the international community.[318] With exports of 60 products with revealed comparative advantage, Iran is the 65th "most complex country".[319]

Should Iran eventually gain membership status in the WTO, among other prerequisites, copyrights will have to be enforced in the country. This will require a major overhaul. The country is hoping to attract billions of dollars' worth of foreign investment by creating a more favorable investment climate through freer trade. Free trade zones such as Qeshm, Chabahar, and Kish Island are expected to assist in this process. Iran allocated $20 billion in 2010 to loans for the launch of twenty trade centers in other countries.[320]

See also Economic Recession in Iran

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.[321] 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.[322] Since 2000 exceptions to this restriction have been made for items including pharmaceuticals and medical equipment.[323]

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.[324] The economic effects of sanctions have been severe.[325] 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 Islamic Revolutionary Guard Corps, banks, insurance, financial transactions and shipping.[326] In 2012 the European Union tightened its own sanctions by joining the three decade-old US oil embargo against Iran.[327][328] In 2015, Iran and the P5+1 reached a deal on the nuclear program that will remove the main sanctions by early 2016.[329] Even though Iran can trade in its own currency some problems subsist mainly due to the fact that it cannot transact in US dollars freely.[330] Given its large reserves of oil and gas, the Iranian rial could become a world reserve currency if parity is established with oil and gas.[331]

In 2018, the United States government unilaterally withdrew from the JCPOA agreement and re-imposed its sanctions on Iran's oil sales, petrochemicals, shipping, metals trading and banking transactions.[332]

The Joint Comprehensive Plan of Action allows Iran to purchase new planes.

According to U.S. Undersecretary of State William J. Burns, Iran may be losing as much as $60 billion annually in energy investment.[333] Sanctions are making imports 24% more costly on average.[334] In addition, the latest round of sanctions could cost Iran annually $50 billion in lost oil revenues.[335] 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.[336][337]

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.[338]

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).[315]

According to NIAC, sanctions cost the United States over $175 billion in lost trade and 279,000 lost job opportunities.[339] Between 2010 and 2012, sanctions cost the E.U. states more than twice as much as the United States in terms of lost trade revenue. Germany was hit the hardest, losing between $23.1 and $73.0 billion between 2010–2012, with Italy and France following at $13.6-$42.8 billion and $10.9-$34.2 billion respectively.[339]

GDP growth turned negative in 2013 (−5%). The unofficial unemployment rate was 20% by mid-2012. Oil exports dropped to 1.4 million bpd in 2014 from 2.5 million bpd in 2011. By 2013, Iran had $80 billion in foreign exchange reserves frozen overseas. Automobile production declined 40% between 2011 and 2013.[340] According to the U.S. government in 2015, Iran's economy has reached a point where it is "fundamentally incapable of recovery" without a nuclear accommodation with the West.[341]

The tentative rapprochement between Iran and the US, which began in the second half of 2013, has the potential to become a world-changing development, and unleash tremendous geopolitical and economic opportunities, if it is sustained […] if Iran and the US were to achieve a diplomatic breakthrough, geopolitical tensions in the Middle East could decline sharply, and Iran could come to be perceived as a promising emerging market in its own right.[342]

In January 2019, President Hassan Rouhani blamed the US for Iran's declining economy. Following the US pullout from an international nuclear deal with Iran and re-imposed sanctions, Iran faced the toughest economic situation in 40 years.[343] According to Majlis, this has caused damages estimated between 150 and 200 billion dollars to the Iranian economy.[344]