Iran: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
B B CC CC BB CCC
Stable. Iran’s comfortable current-account position, low level of public debt and high level of foreign-exchange reserves should enable it to meet its debt-service commitments without difficulty, but deepening international sanctions and policy uncertainty will continue to weigh heavily on its sovereign risk rating.
Negative. Higher inflation and the increasing use of alternative asset classes for government compensation payments following the removal of subsidies will put pressure on the Iranian rial. A sudden devaluation in June highlighted the overvaluation of the currency at the official rate.
Banking sector risk
Stable. The banking sector will face a tough operating environment: political interference in lending decisions will cause the stock of non-performing loans to rise, and international sanctions will hinder banks’ operations abroad.
The supreme leader, Ayatollah Ali Khamenei, will seek to rein in his confrontational president, Mahmoud Ahmadinejad, but ongoing factional in-fighting within the regime could seriously hinder policymaking. There is also an ongoing risk of a military confrontation over Iran’s nuclear programme.
Economic structure risk
Iran’s dependence on hydrocarbons exposes it to the vagaries of international oil and gas prices, and has fuelled concerns over the level of oil production and insufficient foreign investment in the sector.