Iran

Country risk

Country risk in Iran is very high. The OECD country credit grade is 7. This is akin to a speculative grade sovereign rating, which indicates a high likelihood that Iran will be unable and/or unwilling to meet its external debt obligations. Long-standing US sanctions weigh heavily on oil receipts, a major source of foreign exchange.

The World Bank ranks Iran 128th out of 190 countries on its ease of doing business gauge. Iran performs in line with other Middle Eastern countries on measures such as trading across borders, enforcing contracts, getting credit, registering property and dealing with construction permits. But Iran lags in other areas, particularly protecting minority investors and starting a business.

Risk of expropriation in Iran is high. The Iranian revolution in 1979 and the incoming regime led to widespread expropriation of foreign owned assets and businesses. The weak economic climate and ailing government finances raises the risk of expropriation, if the government looks to potentially generate other sources of revenue.  

Political risk in Iran is high, reflecting US sanctions, conflict with regional neighbours, high poverty rates and high inflation that all contribute to social tensions.

Furthermore, Iran’s scores on the World Bank’s governance indicators are very low. Most indicators are in the bottom quartile, and scores are particularly low for regulatory quality, political stability and absence of violence and voice and accountability. Constraints in government administration, inefficiencies and a burdensome regulatory environment are significant challenges to governance.