Economy Of Iran

As of April 2023, the Wikipedia section detailing the economy of Iran was identified as requiring an update, signaling that recent developments or newly available data might not yet be incorporated into the existing narrative. Iran’s economy is characterized as a mixed system with a centrally planned framework, wherein a substantial public sector plays a dominant role. This hybrid structure integrates state control with market-oriented activities, reflecting the government’s significant involvement in economic planning and resource allocation. The economy encompasses several pivotal sectors, notably hydrocarbons—which include both oil and natural gas—agriculture, services, manufacturing, and financial services. These sectors collectively contribute to the nation’s economic output and employment, with hydrocarbons historically serving as the backbone of Iran’s fiscal revenues. The Tehran Stock Exchange (TSE) serves as a major platform for capital market activity in Iran, hosting over 40 distinct industries. This diversity within the stock market underscores the breadth of Iran’s industrial and commercial enterprises, ranging from petrochemicals and automotive manufacturing to telecommunications and banking. Iran’s status as an “energy superpower” is underpinned by its possession of approximately 10% of the world’s proven oil reserves and 15% of its proven natural gas reserves. These vast energy resources have historically positioned Iran among the leading global suppliers of fossil fuels and have been central to its economic and geopolitical influence. Despite this abundance of energy resources, Iran began experiencing an energy crisis starting in 2024. The paradox of an energy-rich country facing shortages and supply challenges highlights underlying issues in energy management, infrastructure, and domestic consumption patterns. A distinctive characteristic of Iran’s economic landscape is the significant role played by religious foundations known as bonyads. These organizations operate with considerable autonomy and control extensive assets, with their combined budgets accounting for more than 30% of the central government’s expenditures. Bonyads function as quasi-governmental entities that engage in commercial activities, social welfare, and charitable operations, thereby exerting substantial influence over the economy. In 2007, Iran embarked on a major subsidy reform plan aimed at restructuring its system of price controls and subsidies, particularly those related to food and energy. This reform sought to reduce the fiscal burden of subsidies on the government budget and to encourage more efficient consumption patterns among the population. However, the implementation of these reforms was complicated by factors such as contraband trade, extensive administrative controls, pervasive corruption, and other restrictive regulatory measures. These impediments have collectively hindered the development of a dynamic private sector capable of driving sustained economic growth. Iran’s long-term economic planning is encapsulated in its 20-year economic vision, which emphasizes market-based reforms and structural adjustments. Within this framework, the country adopted a five-year development plan spanning from 2016 to 2021, with objectives centered on building “a resilient economy” and advancing “science and technology.” This strategic vision aimed to diversify the economy, reduce dependency on oil revenues, and foster innovation and technological development to enhance competitiveness. The export profile of Iran has been dominated by oil and gas, which constituted the majority of government revenue as recently as 2010. This heavy reliance on hydrocarbon exports has made the economy vulnerable to fluctuations in global energy prices and international sanctions. In March 2022, the Iranian parliament, operating under the administration of President Ebrahim Raisi, enacted a significant policy change by deciding to eliminate a major subsidy that had amounted to $15 billion in 2021. This subsidy had supported the importation of essential goods such as food, medicines, and animal feed, and its removal represented a shift towards fiscal consolidation and subsidy reform. Concurrently, in March 2022, Iran reached an agreement to export 20 billion tons of basic commodities, including vegetable oil, wheat, barley, and corn, from Russia. This trade arrangement reflected Iran’s efforts to secure essential imports and strengthen economic ties amidst ongoing international sanctions and economic challenges. Despite possessing an educated population and relatively high human development indicators, Iran’s constrained economic environment and insufficient levels of both foreign and domestic investment have led to a significant emigration of skilled workers. This phenomenon, commonly referred to as a “brain drain,” has resulted in the loss of human capital critical for economic development. The 2015 Joint Comprehensive Plan of Action (JCPOA), commonly known as the nuclear deal, between Iran and the P5+1 countries temporarily lifted most international sanctions. This easing of restrictions provided a boost to Iran’s tourism industry and contributed to a reduction in inflation rates. However, these gains were short-lived as the United States withdrew from the JCPOA in 2018, reinstating sanctions that severely impacted Iran’s economy. Following the US withdrawal, Iran experienced economic setbacks, including a contraction in its gross domestic product (GDP) during 2018 and 2019. Although a modest economic rebound was anticipated in 2020, the overall trajectory remained challenging. Several major economic difficulties compounded Iran’s struggles during this period. The onset of the COVID-19 pandemic in February 2020 exacerbated existing vulnerabilities, disrupting economic activity and public health. The reimposition of US sanctions in mid-2018 further restricted Iran’s access to international markets and financial systems. Concurrently, the country faced rising unemployment rates, persistent inflation—including significant food inflation—and a banking sector that was both weak and undercapitalized. The private sector underperformed due to these constraints, while widespread corruption continued to undermine economic efficiency and investor confidence. The Iranian rial, the national currency, experienced significant depreciation over recent years, reflecting broader economic instability and loss of purchasing power. This currency weakness contributed to inflationary pressures and increased the cost of imports, further straining household incomes and business operations. Iran’s economic environment is also characterized by relatively low rankings in global indices measuring “Economic Freedom” and the “ease of doing business.” These indicators highlight the numerous regulatory, institutional, and structural barriers that constrain entrepreneurial activity and investment. The country’s economic difficulties are further compounded by the interplay of external and internal factors. US sanctions have imposed severe restrictions on trade and finance, limiting Iran’s ability to engage with the global economy. Internally, structural issues such as inefficient state enterprises, bureaucratic hurdles, and governance challenges impede economic dynamism. Additionally, ongoing geopolitical tensions in the region contribute to uncertainty and risk, discouraging long-term investment and complicating economic planning. Together, these elements create a complex and challenging economic landscape for Iran as it navigates both domestic reforms and external pressures.

In 546 BC, the defeat and capture of Croesus, the wealthy king of Lydia, by the expanding Persian Empire marked a significant turning point in the monetary history of the region. Following this conquest, the Persians adopted gold as the primary metal for their coinage, a practice that reflected both Lydia’s established monetary system and the empire’s desire to unify and standardize currency across its vast territories. This shift to gold coinage facilitated trade and economic integration throughout the Persian Empire, laying a foundation for a sophisticated economic system that would endure for centuries. During the reign of Xerxes the Great, who ruled from 485 to 465 BC, the Persian Empire reached its territorial zenith, encompassing diverse regions from India to the Kingdom of Kush in northeastern Africa. Biblical accounts, particularly in the Book of Esther, describe the dispatch of royal decrees and communications emanating from the imperial capital of Susa to these far-flung provinces. These records highlight the administrative complexity and extensive reach of the Persian bureaucracy, which relied on efficient communication networks to maintain control over its heterogeneous domains. The dispatches not only served political and administrative purposes but also underscored the interconnectedness of the empire’s economy and culture. By around 475 BC, the Greek historian Herodotus provided one of the earliest detailed descriptions of the Persian Royal Road, an impressive infrastructure project that spanned approximately 2,857 kilometers. This ancient highway connected Susa, located on the Karun River roughly 250 kilometers east of the Tigris River, to Smyrna, known today as İzmir on the Aegean coast. The Royal Road facilitated rapid communication and trade across the empire, enabling couriers to traverse the distance in remarkably short times through a relay system of mounted messengers. This arterial route not only enhanced administrative efficiency but also stimulated economic activity by linking diverse regions and markets within the empire. Modern agricultural practices in Iran began to take shape in the mid-19th century under the auspices of Amir Kabir, a prominent reformist statesman. In the 1850s, Amir Kabir initiated a series of agricultural reforms that included the importation of modified seeds designed to improve crop yields and resilience. He also fostered international collaboration by establishing contracts with foreign experts and institutions, thereby introducing new agricultural techniques and knowledge to Iran. These reforms represented an early effort to modernize the country’s predominantly agrarian economy and to increase productivity in response to growing domestic needs and global economic trends. The late 19th and early 20th centuries witnessed significant developments in Iran’s banking sector, reflecting broader economic transformations. In 1898, the Polyakov family’s Bank Esteqrazi, a financial institution operating in Iran, was acquired by the Tsarist government of Russia. This bank was subsequently transferred to Iranian control in 1920, after which it operated under the name Bank Iran. The institution continued to function until 1933, when it was incorporated into the newly established Keshavarzi Bank, which specialized in agricultural finance. This transition illustrated the evolving role of banking in supporting Iran’s economic development and the increasing assertion of national control over financial institutions. Concurrently, the Imperial Bank of Persia was founded in 1885, becoming the first modern bank in the country. It established branches in all major Persian cities, thereby facilitating the expansion of commercial activities and providing essential banking services across the empire. The bank played a critical role in introducing modern financial instruments and practices, including the issuance of banknotes and the provision of credit, which contributed to the integration of Iran’s economy into the global financial system. The reign of Reza Shah Pahlavi, from 1925 to 1941, was characterized by sweeping reforms aimed at modernizing Iran’s economy and society. His administration undertook extensive infrastructure improvements, including the construction of roads, railways, and communication networks, which enhanced connectivity and economic integration. Educational reforms expanded access to schooling and technical training, fostering a more skilled workforce. Reza Shah also launched campaigns to reduce foreign influence, particularly targeting foreign concessions and monopolies, thereby asserting greater national control over economic resources. Legal system reforms introduced modern codes and institutions, creating a more predictable environment for business and investment. Additionally, the establishment of modern industries diversified the economy beyond its traditional agricultural base, promoting social change, economic development, and relative political stability during his tenure. In 1941, Reza Shah abdicated under pressure from Allied forces during World War II and was succeeded by his son, Mohammad Reza Shah Pahlavi, who ruled until 1979. The early years of Mohammad Reza Shah’s reign coincided with a period of global conflict and post-war recovery, during which Iran’s economy experienced little fundamental change. The wartime and immediate post-war years were marked by economic stagnation, as the country grappled with the challenges of occupation, resource constraints, and political uncertainty. Between 1954 and 1960, Iran underwent a phase of rapid economic growth fueled primarily by increased oil revenues and substantial foreign aid, particularly from the United States and Western allies. This influx of capital enabled higher levels of investment, predominantly within the government sector, which sought to modernize infrastructure, expand public services, and stimulate industrial development. The economic expansion during this period contributed to rising incomes and improvements in living standards, although the benefits were unevenly distributed across society. However, after 1960, the Iranian economy encountered significant challenges, including rising inflation, depreciation of the national currency—the rial—and the emergence of a foreign trade deficit. These macroeconomic imbalances prompted the government to implement policies aimed at stabilization, which included monetary tightening and fiscal adjustments. As a result, the rates of nominal economic growth and per capita income growth declined by 1961, reflecting the difficulties of managing rapid expansion alongside structural vulnerabilities. Prior to the 1979 Iranian Revolution, Iran experienced a remarkable transformation from a predominantly agricultural economy to one characterized by significant industrialization and modernization. By the 1970s, the country had developed a diversified industrial base, including manufacturing, petrochemicals, and heavy industries, supported by substantial investments in infrastructure and education. Urbanization accelerated as rural populations migrated to cities in search of employment opportunities, contributing to the growth of a modern middle class and the expansion of consumer markets. Despite this rapid development, the period leading up to the revolution was also marked by substantial capital flight, with estimates ranging between $30 billion and $40 billion in 1980 US dollars. This outflow of financial resources slowed economic progress by reducing available domestic capital for investment and increasing vulnerability to external shocks. The capital flight reflected broader political and economic uncertainties, including concerns about governance, corruption, and the sustainability of the economic model. Following the 1979 revolution and the subsequent Iran–Iraq War from 1980 to 1988, the Iranian economy underwent profound changes, with the government assuming control over more than 80% of economic activity. The war inflicted severe human and economic costs, resulting in at least 300,000 Iranian deaths and over 500,000 injuries. The direct and indirect economic damages were estimated at approximately $500 billion, encompassing destruction of infrastructure, loss of productive capacity, and disruption of trade. In the post-war period, the Iranian government prioritized the reconstruction and development of key sectors, including communication, transportation, manufacturing, healthcare, education, and energy. Efforts were made to establish nuclear power facilities and to integrate regional systems to enhance efficiency and self-sufficiency. These initiatives aimed to rebuild the economy, reduce dependence on foreign imports, and promote technological advancement. Since the revolution, Iran’s long-term economic objectives have centered on achieving national independence, full employment, and a high standard of living for its population. These goals have guided policy decisions and development plans, reflecting the desire to create a resilient and equitable economy capable of withstanding external pressures and internal challenges. Iran’s population more than doubled between 1980 and 2000, accompanied by a declining median age, indicative of a youthful demographic profile. Despite the large proportion of Iranians engaged in farming, agricultural output has steadily declined since the 1960s. This decline in productivity has contributed to Iran becoming a net importer of food by the late 1990s, reversing its historical status as an exporter. The reduction in agricultural viability has driven significant rural-to-urban migration, as economic hardship in the countryside compelled many to seek employment and better living conditions in urban centers. Throughout this period, various statistical data and economic indicators have been referenced to analyze trends and assess policy outcomes. These metrics provide insights into the complexities of Iran’s economic development, highlighting the interplay between demographic changes, sectoral shifts, and the impact of domestic and international factors on the country’s economic trajectory.

In 2005, Iran’s national science budget stood at approximately $900 million, a figure that closely mirrored the allocation made in 1990. This stagnation over a 15-year period reflected limited growth in governmental funding for scientific research, suggesting challenges in expanding the country’s investment in science and technology despite broader economic developments. By the early 2000s, Iran dedicated around 0.4% of its Gross Domestic Product (GDP) to research and development (R&D), a proportion that placed the country significantly below the global average of 1.4% for R&D expenditure. This relatively low allocation underscored the constraints faced by the Iranian scientific community in scaling innovation and technological advancement compared to international counterparts. Although Iran sought to enhance its scientific capacity, by 2009 the ratio of research expenditure to GDP had only increased to 0.87%, still falling short of the government’s medium-term target of 2.5%. This shortfall highlighted ongoing difficulties in mobilizing sufficient resources for research despite policy ambitions aimed at fostering a knowledge-based economy. Despite these challenges in funding, Iran achieved remarkable progress in scientific output during the early 2010s. In 2011, the country was recognized as having the fastest scientific growth worldwide, a distinction that reflected a rapid increase in research publications and scientific activities. The following year, in 2012, Iran was ranked 17th globally in science production, indicating its emergence as a significant contributor to the global scientific community, although this particular ranking has been noted as requiring citation. This surge in scientific productivity was supported by a growing number of universities and research institutions, alongside government initiatives to promote higher education and research, which collectively contributed to the expansion of Iran’s scientific footprint on the world stage. Iran’s industrial sector has historically been broad and diversified, encompassing a wide range of manufacturing and mining activities. According to The Economist, in 2008 Iran ranked 39th among industrialized nations, producing industrial goods valued at approximately $23 billion. This industrial output reflected the country’s substantial base in sectors such as petrochemicals, steel, automotive manufacturing, and construction materials. Between 2008 and 2009, Iran’s position in annual industrial production growth improved markedly, rising from 69th to 28th place globally. This improvement was partly attributed to Iran’s relative insulation from the 2008 global financial crisis, which had severely impacted many other economies. The country’s industrial growth during this period was driven by domestic demand and government policies aimed at bolstering local production, although it remained vulnerable to external pressures such as sanctions and fluctuations in oil revenues. The structure of Iran’s economy in the early 21st century was characterized by a dominant service sector, which constituted the largest component of GDP, followed by industry—including mining and manufacturing—and agriculture. This composition reflected broader global trends in economic development, where services increasingly accounted for a significant share of economic activity. In 2008, Iran’s GDP was estimated at $382.3 billion in nominal terms, while its purchasing power parity (PPP) GDP was approximately $842 billion. The per capita GDP at that time stood at $5,470 nominally and $12,800 in PPP terms, indicating a moderate level of income relative to population size. These figures illustrated the country’s economic scale and the disparity between nominal and PPP measures, which accounted for differences in cost of living and inflation. Projections made in 2010 suggested that Iran’s nominal GDP would double within five years, reflecting optimistic expectations for economic expansion. However, real GDP growth was forecasted to average only 2.2% annually during the 2012–2016 period, a rate considered insufficient to significantly reduce unemployment or substantially improve living standards. This modest growth rate was influenced by a range of factors, including international sanctions, structural inefficiencies, and macroeconomic instability. The imposition of sanctions had a particularly severe impact on Iran’s economy by halving its oil exports, a critical source of government revenue and foreign exchange. These export levels began to recover only in 2016, following partial easing of sanctions under international agreements, which provided some relief to the economy. The Iranian rial experienced significant depreciation in 2012, losing more than 50% of its value against foreign currencies. This sharp decline in the currency’s value prompted the government to adopt an import substitution industrialization strategy alongside a broader resistive economy approach. These policies aimed to reduce dependence on imports by encouraging domestic production and to build economic resilience against external pressures such as sanctions and currency volatility. The resistive economy framework emphasized self-sufficiency, economic diversification, and the development of local industries to withstand international economic challenges. Internationally, the International Monetary Fund (IMF) classified Iran as a “transition economy,” indicating that the country was in the process of moving from a centrally planned economic system toward a more market-oriented model. This transition involved gradual reforms intended to liberalize the economy, increase private sector participation, and improve efficiency, although progress was uneven due to political and institutional constraints. In 2008, the United Nations categorized Iran’s economy as semi-developed, reflecting its intermediate status between developing and developed economies. This classification took into account factors such as industrialization level, infrastructure, human development indicators, and economic complexity. In 2014, Iran was ranked 83rd out of 144 countries in the World Economic Forum’s global competitiveness index. The country faced several key challenges that hindered its competitiveness, including political instability, inconsistent policy frameworks, and currency volatility. Additionally, difficulties in accessing financing, particularly for small and medium enterprises (SMEs), constrained entrepreneurial activity and economic diversification. These structural impediments limited the ability of Iranian businesses to innovate and expand, thereby affecting overall economic performance. A significant portion of Iran’s financial resources was reportedly channeled into trading, smuggling, and speculative activities rather than productive sectors such as manufacturing. This allocation of capital reflected distortions in the economy, where rent-seeking behavior and informal economic activities diverted funds away from investments that could generate sustainable growth and employment. Such dynamics were exacerbated by regulatory inefficiencies and governance challenges, which undermined the development of a robust industrial base. Despite these obstacles, international financial institutions and analysts recognized Iran’s economic potential. In 2008, Goldman Sachs identified Iran as a country with the potential to become one of the world’s largest economies in the 21st century, citing its large population, natural resources, and strategic location. This optimistic outlook was echoed by Iranian leadership; in 2014, President Hassan Rouhani stated that Iran had the potential to rank among the ten largest economies globally within the next 30 years, contingent upon successful economic reforms and improved international relations. Nevertheless, Iranian industrialists frequently cited government policies as a major impediment to domestic industrial growth. A common complaint was the government’s failure to support local industries by authorizing the import of similar parts or products, which undermined domestic manufacturing and the internal market. This practice was partly attributed to corruption and mismanagement within governmental institutions, which distorted market signals and discouraged investment in local production capabilities. Such issues contributed to inefficiencies and limited the competitiveness of Iranian industries in both domestic and international markets. Scientific growth in Iran demonstrated significant acceleration between 2000 and 2015. The number of scientific publications increased dramatically from approximately 250 in 2000 to over 20,000 in 2015, reflecting expanded research activities and enhanced academic output. This growth was facilitated by increased enrollment in higher education, government incentives for research, and the establishment of numerous scientific journals and conferences. The expansion of scientific output contributed to Iran’s rising profile in global research, despite ongoing challenges related to funding and international collaboration. Economic indicators over the longer term reveal substantial growth in Iran’s economy. The GDP in current international dollars (PPP) rose from $4,267 million in 1980 to an estimated $13,077,142 million in 2015, illustrating a significant expansion in economic activity over this 35-year period. Concurrently, Iran’s population grew from 38 million in 1980 to approximately 79 million in 2015, nearly doubling in size. This demographic growth increased domestic demand and labor supply, influencing economic development trajectories. The implied PPP conversion rate, measured as USD per Iranian rial (USD/IRR), increased markedly from 40 in 1980 to 9,788 in 2015. This sharp rise indicated persistent inflationary pressures and currency devaluation over the decades, reflecting macroeconomic instability and challenges in maintaining currency value. GDP per capita in PPP terms rose from $4,267 in 1980 to approximately $16,918 in 2015, signaling improvements in average living standards. However, this progress was tempered by inflationary trends, as the inflation index (average Consumer Price Index, CPI) increased from 100 in 2011/2012 to 253 in 2015, indicating significant inflationary pressures that eroded purchasing power. The current account balance of Iran’s economy also experienced a notable shift, moving from a deficit of -3.6 billion USD in 1980 to a surplus of 6.9 billion USD in 2015. This transition reflected improvements in trade balances, particularly due to oil exports and other commodity sales, as well as changes in capital flows. The surplus position suggested a strengthening external economic stance, although it remained vulnerable to fluctuations in global oil prices and geopolitical developments. Together, these macroeconomic trends depict an economy that has undergone substantial transformation, marked by growth and diversification alongside persistent structural and policy challenges.

The fifth plan of Iran’s economic reform was designed with the primary objectives of expanding public healthcare services and strengthening international relations. Recognizing the critical role that a robust healthcare system plays in national development, the plan sought to increase accessibility and quality of medical services across the country. Simultaneously, it aimed to enhance diplomatic and economic ties with other nations to foster a more integrated position within the global economy. These twin goals underscored the broader vision of the reform plan, reflecting a commitment to improving both domestic welfare and external engagement. This reform plan encompassed a wide-ranging set of measures targeting multiple facets of Iran’s economy. Among the most significant components was subsidy reform, which aimed to restructure the extensive state support that had long distorted market mechanisms. Banking recapitalization was another crucial element, intended to strengthen financial institutions and enhance their capacity to support economic growth. Efforts to stabilize the national currency were prioritized to curb inflationary pressures and restore investor confidence. Tax reform sought to broaden the tax base and improve collection efficiency, while customs modernization aimed to streamline trade processes and reduce barriers to commerce. The plan also emphasized construction development to stimulate infrastructure growth, alongside employment initiatives designed to reduce unemployment and underemployment. Additionally, it proposed the nationwide distribution of goods and services to ensure equitable access, alongside measures to enhance social justice and improve overall productivity. Together, these reforms represented a comprehensive strategy to address systemic economic challenges and promote sustainable development. The overarching goal of the fifth reform plan was to achieve self-sufficiency for Iran by the year 2015. This ambitious target reflected a desire to reduce dependency on external resources and vulnerabilities associated with international economic fluctuations. By fostering domestic production capabilities and enhancing economic resilience, the plan aimed to position Iran as a more autonomous and robust economy. This self-sufficiency was envisioned not only in terms of food and energy but also across industrial and technological sectors, thereby laying the groundwork for long-term economic stability and growth. A key target within the reform agenda was to replace the annual $100 billion expenditure on subsidies with more targeted social assistance programs. Historically, Iran had allocated substantial financial resources to broad-based subsidies, particularly on energy and essential goods, which often led to inefficiencies and inequitable benefits. The reform sought to redirect these funds towards social assistance schemes that would more effectively support vulnerable populations. By implementing targeted cash transfers and other welfare programs, the government aimed to mitigate the social impact of subsidy removal while promoting more efficient resource allocation. This shift was expected to enhance fiscal sustainability and reduce distortions in consumption patterns. These reforms were designed to address Iran’s major sources of economic inefficiency and price distortion, anticipating significant restructuring across nearly all economic sectors. The pervasive nature of subsidies and regulatory inefficiencies had long hindered market dynamics, leading to resource misallocation and reduced competitiveness. By tackling these structural issues, the reform plan envisioned a comprehensive transformation that would permeate industries ranging from agriculture and manufacturing to services and energy. This extensive restructuring was necessary to create a more dynamic and responsive economic environment capable of sustaining growth and adapting to global trends. One of the main strategies involved removing energy subsidies to improve industrial efficiency and competitiveness. Energy subsidies had historically kept prices artificially low, encouraging excessive consumption and discouraging investment in energy-saving technologies. By gradually phasing out these subsidies, the reform plan aimed to reflect true market costs, thereby incentivizing industries to adopt more efficient practices and reduce waste. This adjustment was expected to enhance the competitiveness of Iranian products both domestically and internationally by lowering production costs and fostering innovation. Moreover, reducing energy subsidies was aligned with environmental objectives, as it would contribute to more sustainable energy use. By 2016, it was projected that approximately one-third of Iran’s economic growth would stem from productivity improvements. This projection underscored the importance of enhancing efficiency and output per unit of input as a driver of sustainable development. Productivity gains were anticipated to arise from various reform measures, including improved resource allocation, technological adoption, and better management practices. The emphasis on productivity reflected a shift away from growth driven primarily by resource extraction or subsidy-fueled consumption towards a more balanced and innovation-led economic model. Achieving such productivity improvements was critical to maintaining competitiveness in a rapidly evolving global economy. Historically, energy subsidies had contributed to Iran being one of the world’s least energy-efficient economies, with energy intensity levels three times the global average and 2.5 times higher than the Middle Eastern average. This high energy intensity indicated that Iran consumed significantly more energy per unit of GDP compared to other countries, reflecting inefficiencies in production processes and consumption habits. The extensive subsidization of energy prices had encouraged wasteful use and limited incentives for conservation or technological upgrades. Addressing this inefficiency was therefore central to the reform plan’s goals, as reducing energy intensity would not only lower costs but also improve environmental outcomes and align Iran’s economy with international standards. Despite internal economic challenges, Iran’s banking sector was viewed as a potential hedge against the removal of subsidies, as the reform plan was not expected to have a direct impact on banks. The banking system, while facing its own structural issues, was considered relatively insulated from the immediate effects of subsidy reforms. This relative stability was important for maintaining financial sector confidence and ensuring continued access to credit and capital for businesses and consumers. Moreover, recapitalization efforts within the banking sector aimed to strengthen institutions and enhance their role in supporting the broader economic transformation. By reinforcing the banking system, the reform plan sought to provide a stable financial foundation amid the significant adjustments occurring in other parts of the economy.

Iran’s national budget was formulated annually by the Management and Planning Organization of Iran, which played a central role in coordinating economic policy and development strategies. The government prepared the budget proposal and submitted it to the Islamic Consultative Assembly, commonly known as the Majlis, prior to the end of each fiscal year. This process ensured that the legislative body reviewed and approved the budget, providing a legal and institutional framework for government expenditures and revenues. Following the Majlis’s approval of the budget, the Central Bank of Iran was responsible for preparing a detailed monetary and credit policy, which it then submitted to the Money and Credit Council (MCC) for final approval. The MCC, composed of key economic policymakers, ensured that monetary policy aligned with the broader economic objectives set forth by the government. The monetary and credit policies approved by the MCC were integral components of Iran’s comprehensive five-year economic development plans. These plans were designed to guide the country’s economic growth and structural transformation over medium-term horizons. Embedded within the wider framework of the “Vision 2025” strategy, these development plans aimed to achieve long-term sustainable growth by diversifying the economy, reducing dependence on oil revenues, and fostering technological advancement. The Vision 2025 strategy articulated Iran’s ambition to become a developed country with a high standard of living, underpinned by a knowledge-based economy and enhanced global competitiveness. The Fifth Economic Development Plan, spanning from 2010 to 2015, encapsulated a series of specific targets and benchmarks across multiple economic indicators. At the outset of this plan, Iran was ranked as the 18th largest economy globally based on purchasing power parity (PPP) in 2010. The plan set an ambitious goal to elevate Iran’s position to the 12th largest economy by 2015, reflecting aspirations for accelerated economic growth and increased global economic influence. In terms of economic growth, the annual gross domestic product (GDP) growth rate was recorded at 2.6% in 2010. The plan targeted an average annual growth rate of 8%, predicated on a combined domestic and foreign direct investment (FDI) inflow totaling approximately $1.1 trillion. However, forecasts for the 2009–2014 period indicated a more modest average growth rate of 3.6%, highlighting the challenges faced in achieving the ambitious targets. Unemployment was a significant concern during this period. Official statistics reported an unemployment rate of 11.8%, while unofficial estimates varied between 12% and 22%. Opposition sources suggested that the actual unemployment rate could be as high as 30%. The Fifth Plan aimed to reduce unemployment to 7% by 2015, primarily through the creation of one million new jobs annually. This objective underscored the government’s focus on labor market reforms and job creation as critical components of economic development. Inflation was another key macroeconomic indicator targeted for improvement. As of January 2010, the inflation rate stood at 15%, with the plan aiming to reduce this figure to an average of 12% over the plan’s duration. To enhance government revenues and diversify the tax base, the Value Added Tax (VAT) rate was set at 3%, with a goal to increase it to 8%, reflecting efforts to improve fiscal sustainability. Privatization constituted a major pillar of the Fifth Plan’s economic reform agenda. The government aimed to privatize 20% of state-owned enterprises each year, signaling a shift towards greater private sector participation and reducing the dominance of the public sector in the economy. Concurrently, the cooperative sector’s contribution to GDP was less than 5% at the time, but the plan targeted an increase to 25%, emphasizing the role of cooperatives in promoting inclusive economic growth and community-based development. Research and development (R&D) expenditure was relatively low, at 0.87% of GDP, and the plan sought to increase investment in R&D to 2.5%, recognizing the importance of innovation for economic competitiveness. Non-oil exports accounted for 20% of total exports, with a target to raise this share to 30%, equivalent to $83 billion by 2016, thereby reducing reliance on hydrocarbon revenues and expanding Iran’s presence in global markets. The oil sector assumptions embedded in the national budget were based on an oil price of $60 per barrel. However, the actual average oil price during the period was approximately $65 per barrel, which positively influenced government revenues. Projections indicated that oil and gas revenues could reach $250 billion by 2015 once ongoing projects became operational, a figure substantially higher than the International Monetary Fund’s (IMF) projections of around $60 billion. The plan stipulated that 30% of oil revenues would be allocated to the National Development Fund by 2015, a sovereign wealth fund established to manage oil income and support economic diversification. Oil production targets were set to increase from 4.1 million barrels per day (bpd) to 5.2 million bpd, supported by plans to drill and commission approximately 2,500 new oil and gas wells. In the natural gas sector, production was targeted to reach 900 million cubic meters per day, reflecting Iran’s strategic emphasis on expanding its gas industry. The plan included the implementation of 380 R&D projects within the oil industry by 2015, focusing on enhancing oil recovery techniques, gas conversion technologies, and hydro conversion processes, which aimed to improve efficiency and value addition in hydrocarbon exploitation. Investment in the oil and gas sector was projected at $20 billion annually, sourced from both private and foreign investors. This investment was partly directed towards expanding oil refining capacity to meet domestic demand and increase export potential. The petrochemical industry was expected to double its output from approximately 50 million tons per year (tpy) to 100 million tpy, reflecting the sector’s role in diversifying the economy and generating higher-value products. The bunkering market share in the Persian Gulf was targeted to increase from 25% to 50%, corresponding to 7.5 million tpy of liquid fuel, positioning Iran as a regional hub for marine fuel supply. Infrastructure related to oil products storage was planned to expand from 11.5 billion liters to 16.7 billion liters, while natural gas storage capacity was to reach 14 billion cubic meters, enhancing the country’s ability to manage supply fluctuations and support domestic consumption. Electricity generation capacity was projected to increase from 61,000 megawatts (MW) to 86,000 MW, with a targeted improvement in power plant efficiency from 38% to 45%, aimed at optimizing energy production and reducing losses. Investment in the mining and industrial sectors was forecasted at $70 billion, equivalent to 700,000 billion rials, underscoring the government’s commitment to industrialization and resource development. Crude steel production was targeted to rise dramatically from approximately 10 million tpy to 42 million tpy by 2015, while iron ore production was expected to increase from about 27 million tpy to 66 million tpy. Cement production was planned to grow from approximately 71 million tpy to 110 million tpy, and limestone extraction was projected to reach 166 million tpy, supporting construction and infrastructure development. The plan also included the construction of 50 new industrial parks by 2015, designed to foster industrial clusters and facilitate manufacturing growth. Port capacity was to be expanded from 150 million tons to 200 million tons, enhancing Iran’s logistics and trade infrastructure. The railway network length was targeted to increase from 10,000 kilometers to 15,000 kilometers, with an annual investment cost estimated at $8 billion, reflecting the emphasis on improving domestic connectivity and facilitating regional trade. Transit of goods through Iran was projected to grow from 7 million tons to 40 million tons, highlighting the country’s strategic position as a transit corridor. Electronic trade was identified as a key area for modernization, with targets set for it to constitute 20% of domestic trade, 30% of foreign trade, and 80% of government transactions. This focus on e-commerce and digital government services aimed to enhance efficiency, transparency, and integration with the global economy. The Sixth Development Plan, covering the period from 2016 to 2021, marked a shift in approach by emphasizing “guidelines” rather than rigid “hard targets.” This plan prioritized three main areas: the development of a resilient economy capable of withstanding external shocks and internal challenges; progress in science and technology to drive innovation and competitiveness; and the promotion of cultural excellence as a foundation for social cohesion and national identity. This strategic orientation reflected lessons learned from previous plans and the evolving economic and geopolitical environment, aiming to build a more adaptable and forward-looking economic framework.

Since the 1979 Islamic Revolution, the allocation of government spending in Iran has reflected the priorities set by the post-revolutionary leadership, with a significant emphasis on social policies. Approximately 59% of government expenditures have been directed toward social programs, underscoring the regime’s commitment to welfare, education, and healthcare as fundamental pillars of its governance. Economic matters, including infrastructure development and industrial growth, have accounted for around 17% of spending, highlighting efforts to modernize and diversify the economy beyond oil dependence. National defense has consistently absorbed about 15% of the budget, reflecting the regime’s focus on maintaining internal security and regional military capabilities. The remaining 13% has been allocated to general affairs, encompassing administrative costs and other government functions necessary for the operation of the state. The distribution of government payments provides further insight into Iran’s fiscal priorities. Of the total payments made by the government, 39% have been devoted specifically to education, health, and social security, which aligns with the broader social policy emphasis. A further 20% has been spent on other social programs, illustrating a comprehensive approach to social welfare that extends beyond basic services. Agriculture, a sector critical for food security and rural livelihoods, has received a modest 3% of government payments. Investments in utilities such as water, power, and gas have accounted for 16%, reflecting the importance of infrastructure development in supporting both urban and rural populations. Manufacturing and mining sectors have been allocated 5%, indicating a measured approach to industrial growth. Roads and transportation infrastructure have received 12%, essential for economic integration and mobility, while the remaining 5% has been directed toward other economic affairs, including trade facilitation and economic planning. Iran’s investment as a percentage of Gross Domestic Product (GDP) reached 27.7% in 2009, a figure that signals a relatively high level of capital formation within the economy. This level of investment is indicative of the government’s attempts to stimulate economic growth and development through infrastructure projects, industrial expansion, and other capital-intensive initiatives. However, the effectiveness of these investments has often been challenged by structural inefficiencies and external economic pressures. Between 2002 and 2006, Iran experienced inflation rates fluctuating around an average of 14%, a period marked by moderate price increases that affected household purchasing power and economic stability. This inflationary environment was influenced by various factors, including monetary policy decisions, subsidy reforms, and external economic conditions. The government’s ability to manage inflation during this period was critical for maintaining social stability and fostering economic growth. In 2008, the composition of Iran’s government revenue revealed a heavy reliance on hydrocarbon exports, with approximately 55% of revenue derived from oil and natural gas. This dependence on energy exports has historically made the Iranian economy vulnerable to fluctuations in global oil prices and international sanctions. Taxes and fees contributed 31% of government revenue, reflecting the challenges in broadening the tax base and formalizing the economy. A significant portion of Iran’s population operates outside the formal economy, with millions of individuals not participating in tax payment. This informal economic activity undermines government revenue collection and complicates fiscal policy implementation. The government’s budget for the fiscal year 2012 was set at $462 billion, representing a 9% decrease compared to the previous year, 2011. This contraction was based on an assumed oil price of $85 per barrel, reflecting cautious fiscal planning amid volatile global energy markets and increasing economic sanctions. The estimated exchange rate of the US dollar during this period was approximately IRR 12,260, a figure that played a crucial role in budgeting and economic calculations given the multiple exchange rates and currency volatility. According to Iran’s Department of Statistics, strict adherence to proper budgeting rules and fiscal discipline could enable the government to save at least 30 to 35% of its expenses. This assertion highlights the potential for improved fiscal management and efficiency, which could alleviate budgetary pressures and reduce reliance on oil revenues. However, challenges such as bureaucratic inefficiencies, corruption, and political considerations have often hindered the realization of these savings. In 2012, the Central Bank of Iran maintained an interest rate of 21%, a relatively high nominal rate aimed at controlling inflation and stabilizing the currency. Despite these measures, the inflation rate increased to 22% in 2012, marking a 10% rise compared to 2011. This surge in inflation exacerbated economic hardships for ordinary Iranians, eroding real incomes and increasing the cost of living. The persistent inflationary pressures underscored the difficulties faced by monetary authorities in balancing growth and price stability. Coordination between Iran’s fiscal and monetary policies has historically been minimal, reflecting institutional fragmentation and political complexities. This lack of synergy has often resulted in conflicting policy signals, with fiscal expansionary measures undermining monetary tightening efforts and vice versa. The absence of coherent coordination has impeded the effectiveness of economic stabilization strategies and contributed to macroeconomic volatility. The Central Bank of Iran reported that monthly subsidies implemented by the government contributed to narrowing the income gap between the rich and the poor. These subsidies, aimed at reducing the cost of essential goods and services, played a role in mitigating poverty and income inequality. However, the bank cautioned that this positive trend could reverse if high inflation persisted, as rising prices disproportionately affect lower-income households and erode the real value of subsidies. Iran’s foreign reserves were estimated at approximately $110 billion in 2011, providing a substantial buffer for external payments and economic stability. The country managed to balance its external payments by pricing oil exports at around $75 per barrel, a figure used to stabilize fiscal and monetary planning amid fluctuating global oil markets. However, as of 2013, only between $30 billion and $50 billion of these reserves were accessible due to international sanctions imposed on Iran’s banking and financial sectors. These sanctions severely restricted Iran’s ability to utilize its foreign assets, complicating efforts to stabilize the economy and finance imports. Iranian media outlets raised critical questions regarding the government’s failure to repatriate its foreign reserves prior to the imposition of the latest sanctions and its reluctance to convert these reserves into gold. Such measures could have potentially shielded the country’s assets from freezing and enhanced economic resilience. The media scrutiny reflected broader public concerns about economic management and the government’s preparedness in the face of escalating international pressure. Between December 2011 and April 2012, the Iranian rial experienced a sharp depreciation of more than 40%, reflecting mounting economic pressures, capital flight, and declining confidence in the currency. This rapid depreciation contributed to rising inflation and increased the cost of imported goods, further straining household budgets and business operations. Despite falling oil prices during the fiscal year 2012, Iran’s external and fiscal accounts remained in surplus. The current account surplus was expected to reach 2.1% of GDP, indicating that the country continued to generate more foreign exchange than it expended. Additionally, the net fiscal balance, after payments to Iran’s National Development Fund, was projected to be in surplus by 0.3% of GDP. These surpluses suggested a degree of fiscal resilience despite adverse external conditions and declining oil revenues. In 2013, Iran’s external debt decreased significantly from $17.3 billion in 2012 to approximately $7.2 billion. This reduction reflected efforts to manage external liabilities amid tightening international sanctions and constrained access to foreign capital markets. Lower external debt reduced the country’s vulnerability to external shocks but also indicated limited borrowing capacity. However, the overall fiscal deficit was projected to worsen to 2.7% of GDP in the fiscal year 2016, up from 1.7% in 2015. This deterioration signaled increasing fiscal pressures, likely driven by continued subsidy reforms, rising expenditures, and constrained revenue collection. The widening deficit posed challenges for macroeconomic stability and underscored the need for comprehensive fiscal reforms. By March 2020, the amount of money in circulation in Iran had reached approximately $700 billion when measured against the 2017 pre-devaluation exchange rate. This substantial increase in the money supply contributed to further depreciation of the Iranian rial and heightened inflationary pressures. The rapid expansion of liquidity was partly a response to fiscal deficits and economic sanctions, but it also exacerbated currency instability and eroded public confidence in the national currency. The resulting inflation further strained the purchasing power of Iranian households and complicated economic management efforts.

As of 2023, Iran allocated approximately 10.3 billion USD to national defense, a figure representing about 2.1% of its Gross Domestic Product (GDP). This level of defense spending is notable for its comparability to that of several Western countries, including the United Kingdom, France, and Finland, which maintain similar proportions of GDP dedicated to military expenditures. Such allocation underscores the strategic priority Iran places on maintaining and advancing its defense capabilities despite facing significant economic challenges and international pressures. The sustained investment reflects Tehran’s commitment to preserving its sovereignty and regional influence through military strength. The Ministry of Defense in Iran actively promotes its military advancements and boosts troop morale through various public events. Among these are the New Weapons Ceremony and the Young Soldier Festival, which serve dual purposes: showcasing the latest developments in military technology and fostering a sense of pride and motivation among service members and the general population. These ceremonies often highlight indigenous weapons systems and innovations, emphasizing Iran’s efforts to achieve self-reliance in defense manufacturing amid international sanctions. By publicly celebrating military achievements and the dedication of young recruits, the Ministry reinforces nationalistic sentiments and the importance of defense readiness. In the fiscal framework for 2025, Iran designated a substantial portion of its oil and gas export revenues to support its security apparatus. Specifically, 51% of the total revenues from these exports, estimated at 12 billion euros, were allocated to fund the Islamic Revolutionary Guard Corps (IRGC) and the Law Enforcement Force (LEF). This significant appropriation reflects the central role these organizations play in Iran’s internal and external security strategies. The IRGC, in particular, functions not only as a military force but also as an influential political and economic actor within the country. By channeling more than half of its hydrocarbon export income to these forces, Iran underscores the priority it places on maintaining robust security institutions amid ongoing regional tensions and domestic challenges. Beyond its direct military expenditures, Iran extends financial support to a range of regional and militant groups aligned with its strategic interests. These include Hezbollah in Lebanon, the Yemeni Houthis, various Iraqi militias, and Hamas in the Palestinian territories. This support manifests in the form of funding, weapons, training, and logistical assistance, enabling these groups to act as proxies that advance Iran’s influence across the Middle East. The backing of such non-state actors allows Iran to project power indirectly, counterbalance adversaries, and shape regional dynamics without engaging in conventional warfare. This proxy network has become a cornerstone of Iran’s asymmetric warfare strategy, contributing to its ability to challenge rival powers in the region. The annual average budget allocated by Iran for its proxy groups is estimated at approximately US$1.6 billion. This considerable expenditure highlights the scale of Iran’s commitment to sustaining these allied forces and maintaining its regional footprint. Funding these proxies requires a continuous financial outlay to support their operational costs, including arms procurement, salaries, and infrastructure. The investment in proxy groups is viewed by Iranian leadership as a cost-effective means of extending influence and deterring adversaries, even as it places a substantial burden on the national economy. The sustained financial commitment also reflects the strategic calculation that such groups serve as force multipliers in Iran’s broader defense and foreign policy objectives. Beginning in early 2011, Iran reportedly allocated a total of US$50 billion to support the Assad regime in Syria, according to Syrian opposition sources. This massive financial and military investment was aimed at preserving the regime’s hold on power during the protracted Syrian civil war. Iran’s support included providing military advisors, weapons, and economic aid to bolster the Syrian government against various opposition factions. Despite this extensive involvement and expenditure, the investment ultimately failed to secure a lasting victory for the Assad regime, which faced significant territorial losses and political isolation. The collapse of the regime, as perceived by opposition groups, marked a costly setback for Iran’s regional ambitions and demonstrated the limits of its interventionist policies. The most significant and costly component of Iran’s defense expenditure is its nuclear program, which has been estimated to incur total costs approaching US$500 billion by 2025. This figure encompasses the development, research, infrastructure, and operational expenses associated with Iran’s pursuit of nuclear technology. The program has been a central pillar of Iran’s strategic defense posture, aimed at achieving technological parity and deterrence capabilities in a volatile regional environment. The substantial financial commitment to the nuclear program reflects Tehran’s prioritization of nuclear advancement despite facing intense international scrutiny and sanctions. The program’s scale and expense illustrate the lengths to which Iran is willing to go to secure what it perceives as vital national security interests. Iran’s nuclear program has also precipitated a series of international sanctions, which have had profound and long-lasting impacts on the country’s economy. These sanctions, imposed by entities including the United States, the European Union, and the United Nations, have contributed to a prolonged period of economic stagnation in Iran. Analysts estimate that the cumulative economic cost of these sanctions has reached approximately US$1.2 trillion over a 12-year period. The sanctions have targeted key sectors such as finance, energy, and trade, severely restricting Iran’s ability to engage with the global economy. The resulting economic isolation has hindered growth, increased inflation, and exacerbated unemployment, thereby compounding the challenges faced by the Iranian government in managing its defense and social expenditures. One of the most tangible consequences of the sanctions regime has been a dramatic decline in foreign direct investment (FDI) into Iran. Between 2011 and 2021, the country experienced an approximate 80% reduction in FDI, reflecting the reluctance of international investors to engage with an economy under heavy sanctions and geopolitical uncertainty. This sharp decline in investment inflows has deprived Iran of critical capital needed for infrastructure development, technological advancement, and economic diversification. The reduction in FDI has further constrained Iran’s economic potential and limited its ability to generate revenue streams that could otherwise support defense spending and social programs. The diminished attractiveness of Iran as an investment destination underscores the broader economic toll exacted by its defense-related policies and international isolation.

In 2024, Iran implemented a significant legislative reform that altered the traditional structure of its workweek by establishing a two-day weekend. Prior to this change, the Iranian workweek had been characterized by a single-day weekend, with Friday serving as the sole day off for most workers due to its religious and cultural significance in the Islamic calendar. The new legislation introduced Saturday as an additional weekend day, effectively creating a combined two-day weekend consisting of Friday and Saturday. This adjustment aligned Iran more closely with international norms where two-day weekends are customary, while also accommodating domestic social and economic considerations. The addition of Saturday to the weekend marked a departure from the previous work schedule and was intended to provide workers with extended rest periods, thereby improving work-life balance and potentially increasing productivity. This change also reflected evolving societal expectations and the government’s recognition of the need to modernize labor regulations in response to both internal demands and external economic pressures. The inclusion of Saturday as a non-working day was carefully integrated into the national calendar, ensuring that public institutions, private enterprises, and educational establishments could synchronize their operations accordingly. Concomitant with the introduction of the two-day weekend, the government removed Thursday from the official workweek schedule. Historically, Thursday had been a regular working day, with the workweek typically spanning from Saturday through Thursday, followed by Friday as the weekend. By eliminating Thursday as a workday, the new schedule reduced the total number of working days in the week, thereby shortening the overall work period. This removal was part of a broader effort to recalibrate the workweek structure to better suit contemporary economic and social realities, including considerations of worker welfare and alignment with global labor standards. The legislative reform also entailed a reduction in the total number of workweek hours. Previously, the standard workweek in Iran comprised 44 hours, distributed across the working days. Following the reform, the total weekly working hours were decreased to a range between 40 and 42 hours, depending on the specific sector or regulatory framework governing different types of employment. This reduction was designed to ease worker fatigue and enhance efficiency, while allowing flexibility for various industries to adapt the new hours in a manner consistent with their operational needs. The variation in hours acknowledged the diverse nature of Iran’s economy, which includes sectors such as manufacturing, services, and agriculture, each with distinct labor requirements. These changes in work time regulations were part of a broader trend within Iran to modernize labor laws and improve the quality of life for workers. The shift to a two-day weekend and the reduction in work hours were expected to have multiple social and economic benefits, including increased leisure time for families, better alignment with international business practices, and potential improvements in worker health and productivity. The government’s decision to implement these reforms reflected a balancing act between maintaining economic output and responding to the evolving expectations of the Iranian workforce in a rapidly changing global environment.

Iran’s Gross Domestic Product (GDP) experienced a contraction during the fiscal years 2018 and 2019, reflecting a period of economic downturn influenced by multiple internal and external pressures. This decline was attributed to a combination of factors including tightened international sanctions and domestic economic challenges, which collectively suppressed growth and investment. Despite this downturn, projections from the International Monetary Fund’s (IMF) April 2020 World Economic Outlook suggested a modest economic rebound for Iran in the fiscal year 2020/2021. The anticipated recovery was expected to be gradual and contingent upon improvements in both domestic economic policies and external conditions, particularly the easing of sanctions and stabilization of global oil markets. The Iranian economy faced a complex array of challenges that compounded its difficulties during this period. The onset of the COVID-19 pandemic in February 2020 introduced a significant public health crisis that further strained economic activity by disrupting supply chains, reducing consumer demand, and limiting workforce availability. This pandemic exacerbated pre-existing economic issues, notably the reimposition of United States sanctions in mid-2018, which severely restricted Iran’s ability to export oil and access international financial systems. These sanctions led to a marked decline in oil production, a critical component of Iran’s economy, and forecasts indicated that oil exports would experience only a slow recovery in the subsequent years. The combined effect of these factors contributed to a fragile economic environment marked by uncertainty and constrained growth prospects. Labor-force participation in Iran showed signs of increase during this period, reflecting demographic trends and government efforts to integrate more individuals into the workforce. However, despite this rise, the unemployment rate remained persistently high, exceeding 10% as of 2020. Economic analysts projected that unemployment would continue to rise in 2021 and 2022, driven by the ongoing impact of sanctions, pandemic-related disruptions, and structural inefficiencies within the economy. The elevated unemployment rate underscored the challenges faced by the labor market in absorbing new entrants and providing stable employment opportunities, particularly for youth and women, who historically have had lower participation rates. Inflation in Iran reached alarming levels, with the annual rate hitting 41.1% in 2019. This surge in inflation was driven by currency depreciation, supply chain disruptions, and increased costs of imported goods, all of which eroded purchasing power and heightened economic uncertainty for households and businesses alike. The World Bank projected that inflation would persist at high levels in the coming years, although it anticipated a gradual decline to approximately 34-33%. Despite this expected moderation, inflation remained a significant concern, as sustained high inflation rates undermined economic stability and complicated fiscal and monetary policy management. By July 2022, inflationary pressures intensified further, with the average inflation rate surging to 40.5%. This increase was particularly pronounced in the food and beverage sector, where inflation reached an extraordinary 87%. Such steep rises in essential goods prices had profound implications for household welfare, disproportionately affecting lower-income groups and exacerbating social inequalities. The sharp inflation in food and beverages reflected broader systemic issues including currency volatility, supply constraints, and inefficiencies in domestic production and distribution networks. Iran’s banking system was characterized by chronic weaknesses and undercapitalization, as noted by financial institutions such as Nordea Bank Abp. The banking sector was burdened with billions of dollars in non-performing loans, which hindered its capacity to extend credit and support economic growth. This fragile financial environment limited the availability of capital for private sector enterprises, contributing to what was described as an “anemic” private sector. The lack of robust financial intermediation impeded investment and innovation, further constraining the economy’s ability to diversify and modernize. The Iranian rial experienced significant depreciation against the US dollar during this period. After stabilizing at an unofficial exchange rate of approximately 40,000 rials to one US dollar in 2017, the currency depreciated sharply to around 120,000 rials to one US dollar by November 2019. This rapid devaluation reflected mounting economic pressures, including sanctions-induced foreign exchange shortages, inflationary expectations, and diminished investor confidence. The currency instability complicated trade and investment decisions, increased the cost of imports, and contributed to inflationary spirals within the economy. Iran’s economic performance was also reflected in its poor rankings on global indices assessing economic freedom and business environment. The Heritage Foundation’s “Index of Economic Freedom” placed Iran at 164 out of 180 countries, indicating significant constraints on economic liberties such as property rights, regulatory efficiency, and open markets. Similarly, the World Bank’s ease of doing business index ranked Iran at 127 among 190 countries, highlighting challenges related to starting and operating businesses, enforcing contracts, and accessing credit. These rankings underscored systemic institutional and regulatory obstacles that hindered economic development and discouraged both domestic and foreign investment. Privatization efforts in Iran, intended to reduce state control and foster a more dynamic private sector, faced criticism for largely benefiting entities linked to the Islamic Revolutionary Guard Corps (IRGC) and its affiliates rather than skilled businesspeople. Critics argued that rather than promoting genuine private entrepreneurship and competition, the transfer of state-owned enterprises often resulted in the consolidation of economic power within politically connected groups. This phenomenon limited the potential for broad-based economic reforms and perpetuated inefficiencies and corruption within the economy, undermining the goals of privatization policies. Operational challenges for businesses in Iran were vividly described by a local businessperson in 2020 during an interview with foreign journalist Dexter Filkins. The entrepreneur highlighted chronic shortages of material inputs, which disrupted production schedules and supply chains. Additionally, the presence of “unruly inspectors pushing for bribes” created an environment of uncertainty and additional costs, complicating compliance and regulatory processes. These factors combined to make future planning nearly impossible for businesses, undermining confidence and deterring investment. The anecdote illustrated the broader difficulties faced by the private sector in navigating bureaucratic obstacles and an unpredictable economic landscape. Fuel consumption patterns in Iran further illustrated structural inefficiencies within the economy. According to data from the National Iranian Oil Company (NIOC), daily gasoline consumption in 2021 exceeded 85 million liters, a figure approximately ten times higher than that of Turkey, despite both countries having similar population sizes. This disproportionately high consumption suggested widespread fuel subsidies, inefficient energy use, and a lack of effective demand management policies. The excessive gasoline consumption imposed significant fiscal burdens on the government and contributed to environmental concerns, highlighting the need for reforms in energy pricing and consumption behavior. Collectively, these economic challenges painted a complex picture of Iran’s economy during the late 2010s and early 2020s, characterized by contraction, inflation, currency instability, institutional weaknesses, and structural inefficiencies. The interplay of domestic policy constraints, international sanctions, and external shocks such as the COVID-19 pandemic created a difficult environment for economic recovery and growth, with significant implications for the country’s social and political stability.

Following the prolonged hostilities with Iraq during the 1980s, the Iranian government announced ambitious plans aimed at transforming the structure of the national economy by privatizing a majority of its industries. This initiative was coupled with a broader strategy to liberalize and decentralize economic activities, marking a significant shift from the heavily state-controlled economic model that had dominated since the 1979 Islamic Revolution. The intent was to reduce the state’s direct involvement in commercial enterprises and encourage private sector participation, thereby fostering efficiency and growth. However, the privatization process encountered considerable challenges and proceeded at a slow pace, largely due to resistance from a nationalist majority within the Iranian parliament. This faction was wary of relinquishing state control over key industries, perceiving such moves as potentially undermining national sovereignty and economic independence. By 2006, despite ongoing efforts to divest state holdings, approximately 70 percent of Iran’s economy remained under state ownership. The government retained control over most heavy industries, which included critical sectors such as steel production, petrochemicals, copper mining, automobile manufacturing, and machine tool industries. These sectors were considered strategic for national development and security, and thus remained predominantly publicly owned and managed. In contrast, the landscape of light industries in Iran had evolved differently; by the same year, the majority of light industrial enterprises were privately owned. This dichotomy reflected a partial success in liberalizing certain segments of the economy while maintaining stringent state control over more capital-intensive and strategically important industries. The framework for economic ownership in Iran is constitutionally enshrined in Article 44 of the Iranian Constitution, which delineates the country’s economy into three distinct sectors: state, cooperative, and private. The state sector is defined as encompassing large-scale industries and services deemed vital to the national interest. This includes foreign trade, major mineral extraction, banking and insurance, power generation, the construction and management of dams and large-scale irrigation networks, as well as communications infrastructure such as radio, television, postal, telegraph, and telephone services. Additionally, transportation sectors including aviation, shipping, roads, and railroads fall under state ownership and management. These enterprises are publicly owned and operated by government agencies or state-affiliated organizations, reflecting the constitutional mandate that these critical sectors remain under state control. The cooperative sector represents a unique component of Iran’s economic structure, consisting of companies and enterprises engaged in production and distribution activities across both urban and rural areas. These cooperatives operate in accordance with Shariah law, emphasizing principles of mutual assistance and social welfare. As of 2012, the cooperative sector was substantial in scale, comprising 5,923 consumer cooperatives that collectively employed 128,396 individuals. These cooperatives served a membership base exceeding six million people, indicating their significant role in providing goods and services within the community. The cooperative model was designed to complement the state and private sectors by fostering grassroots economic participation and supporting equitable distribution of resources. The private sector in Iran functions primarily in areas such as construction, agriculture, animal husbandry, industry, trade, and various service industries. It supplements the activities of the state and cooperative sectors by providing goods and services that are not fully covered by public enterprises. Over time, the private sector has expanded its footprint, despite the constitutional framework that originally envisioned a more limited role for private enterprise. Article 44’s stipulations have never been strictly enforced in practice, resulting in a private sector that plays a considerably larger role in the Iranian economy than initially outlined. This expansion reflects both the practical realities of economic management and the pressures to increase efficiency and innovation through private initiative. In recent years, the Iranian government has taken steps to accelerate the privatization process. A notable development occurred in 2004 when a constitutional amendment was passed, allowing for the privatization of up to 80 percent of state assets. This legal change was intended to facilitate a more rapid transfer of ownership from the public to the private sector, thereby stimulating economic dynamism and reducing the fiscal burden on the state. The privatization strategy included a specific mechanism for asset sales: 40 percent of the assets targeted for privatization were to be sold through the “Justice Shares” scheme, a program designed to distribute shares among the general population, particularly low-income groups, to promote broader economic participation. The remaining 40 percent of assets earmarked for privatization were to be sold via the Tehran Stock Exchange, providing a formal market platform for the transfer of ownership. The government planned to retain the remaining 20 percent of these assets, maintaining a degree of control over key enterprises. In 2005, the total value of government-owned assets in Iran was estimated at approximately $120 billion. Between 2005 and 2010, the government succeeded in privatizing around $63 billion worth of these assets, marking a significant shift in ownership patterns. This divestment contributed to a notable reduction in the government’s direct share of the gross domestic product (GDP), which fell from 80 percent to 40 percent over this period. The privatization drive was part of broader economic reforms aimed at increasing efficiency, attracting investment, and stimulating private sector growth. However, the process was complicated by lingering issues related to corporate governance and enterprise management. Many Iranian companies remained uncompetitive due to years of mismanagement and inefficiencies, which diminished their attractiveness to potential investors. These challenges included bureaucratic inertia, lack of transparency, and insufficient adherence to market principles, all of which undermined the potential benefits of privatization. The legacy of state control had left many enterprises ill-prepared for the rigors of competitive markets, and this reality slowed the pace of economic liberalization. Consequently, while privatization was a stated policy goal, its implementation was uneven and often met with skepticism from both domestic and foreign investors. Adding to the complexity of Iran’s economic landscape, then-President Mahmoud Ahmadinejad asserted that a disproportionate concentration of wealth existed within the country. He claimed that 60 percent of Iran’s wealth was controlled by just 300 individuals, highlighting significant disparities in wealth distribution. This concentration of economic power among a small elite underscored ongoing challenges related to economic equity and social justice within the broader context of Iran’s evolving ownership structure. The persistence of such disparities has continued to influence debates over economic policy and the role of privatization in achieving more inclusive growth.

The Islamic Revolutionary Guard Corps (IRGC) wields significant influence over Iran’s economy, controlling an estimated one-third of the nation’s economic activities through an extensive network of subsidiaries and trusts. This vast economic footprint encompasses a diverse array of sectors, ranging from construction and telecommunications to manufacturing and infrastructure development. The IRGC’s economic reach is not only broad but also deeply integrated into the fabric of Iran’s commercial landscape, positioning it as a dominant force in the country’s economic affairs. By 2007, the Los Angeles Times reported that the IRGC maintained connections with more than one hundred companies, collectively generating annual revenues exceeding $12 billion. This substantial income stream underscored the IRGC’s pivotal role in Iran’s economy, with a particular emphasis on the construction sector. The organization’s involvement in construction included large-scale projects such as residential developments, commercial buildings, and critical infrastructure, reflecting its capacity to mobilize resources and labor on a national scale. The IRGC’s economic activities extended beyond mere business ventures, often intertwining with strategic national interests and government priorities. The Ministry of Petroleum played a crucial role in bolstering the IRGC’s economic dominance by awarding it billions of dollars in no-bid contracts. These contracts frequently involved major infrastructure projects, including the development and maintenance of oil and gas facilities, pipelines, and related energy infrastructure. The absence of competitive bidding processes for these contracts raised concerns about transparency and fair market competition but simultaneously ensured a steady flow of lucrative government funds into IRGC-controlled enterprises. This preferential treatment further entrenched the IRGC’s position within Iran’s critical energy sector, enabling it to expand its operational capabilities and economic influence. In addition to its formal economic activities, the IRGC was tasked with border control responsibilities, which conferred upon it a near-monopoly on smuggling operations across Iran’s extensive frontiers. This monopoly on smuggling generated significant revenue streams, albeit through illicit means, and imposed substantial costs on legitimate Iranian companies. Smuggling activities, which included the unauthorized movement of goods such as fuel, consumer products, and luxury items, were estimated to cost Iranian businesses billions of dollars annually. The IRGC’s control over these operations allowed it to regulate and profit from the flow of goods entering and leaving the country, effectively shaping market dynamics in border regions. The prevalence of smuggling was partly fueled by the Iranian government’s policy of generous subsidization of domestic goods, particularly fuel. Subsidies lowered the official prices of these commodities, creating substantial price differentials between Iran and neighboring countries. This economic environment incentivized smuggling, as smugglers could purchase subsidized goods at low prices within Iran and sell them at higher rates across borders. The IRGC’s involvement in smuggling thus capitalized on government subsidy policies, turning them into opportunities for profit while simultaneously undermining the formal economy and distorting market conditions. Beyond its activities in construction and smuggling, the IRGC diversified its economic portfolio by operating a telecommunications company, managing laser eye-surgery clinics, manufacturing automobiles, and engaging in the construction of bridges and roads. The telecommunications enterprise allowed the IRGC to participate in one of the fastest-growing sectors of the Iranian economy, providing services that ranged from mobile communications to internet infrastructure. Its management of laser eye-surgery clinics represented an unusual but lucrative foray into the healthcare sector, offering specialized medical services to the public. The IRGC’s involvement in car manufacturing demonstrated its capacity to compete in industrial production, contributing to Iran’s automotive industry through the production of vehicles under its control. Simultaneously, the organization’s engagement in building bridges and roads highlighted its role in developing critical transportation infrastructure, facilitating connectivity and economic activity across the country. In the energy sector, the IRGC played an active role in the development of oil and gas fields within Iran. This involvement included exploration, extraction, and the establishment of related infrastructure necessary for the production and distribution of hydrocarbons. By participating directly in the energy sector, the IRGC not only secured substantial revenue streams but also reinforced its strategic importance to Iran’s national economy and security. The organization’s control over energy resources and infrastructure further cemented its position as a key actor in shaping Iran’s economic landscape and advancing the government’s broader geopolitical objectives.

Welfare programs aimed at supporting the needy in Iran are administered through a complex network comprising more than 30 public agencies, a variety of semi-state organizations known as bonyads, and several private non-governmental organizations (NGOs). These entities collectively form a multifaceted social safety net designed to provide assistance to vulnerable populations, including war veterans, the disabled, and impoverished families. The involvement of numerous agencies reflects the fragmented nature of Iran’s welfare system, where responsibilities are distributed among different institutions with overlapping mandates. This multiplicity of actors has often led to inefficiencies and coordination challenges in delivering social services effectively across the country. Central to Iran’s welfare and economic landscape are the bonyads, a consortium of over 120 organizations that operate under a unique status combining religious, social, and economic functions. These entities are tax-exempt and receive substantial government subsidies alongside religious donations, which constitute a significant source of their funding. The bonyads are rooted in the post-revolutionary period, established initially to redistribute wealth and provide social welfare in line with Islamic principles. Over time, they have evolved into powerful economic actors, leveraging their tax-exempt status and financial support to expand into various commercial sectors. Their dual role as both charitable foundations and economic conglomerates places them at the intersection of Iran’s religious authority and state economy. Reporting directly to the Supreme Leader of Iran, the bonyads wield considerable influence, controlling an estimated 20% or more of the country’s Gross Domestic Product (GDP). This direct line of accountability to the highest religious and political authority in Iran grants them a level of autonomy and protection from conventional governmental oversight. The Supreme Leader’s control over these organizations underscores their strategic importance within Iran’s political economy, as they serve not only as instruments of social welfare but also as vehicles for consolidating power and distributing patronage. The substantial share of the national economy managed by the bonyads highlights their role as one of the largest economic actors in Iran, rivaling even major state-owned enterprises. The operational scope of the bonyads is remarkably diverse, encompassing a wide array of enterprises that span multiple industries. Their business interests include large-scale agricultural ventures such as soybean and cotton farms, which contribute to Iran’s domestic food production and raw material supply. In addition to agriculture, bonyads own and manage hotels, catering to both domestic and international tourism markets. They are also involved in manufacturing sectors, operating soft drink companies and automobile plants, thereby participating in consumer goods production and industrial development. Furthermore, bonyads maintain shipping lines, facilitating logistics and transportation services crucial for trade and commerce. This extensive portfolio reflects their evolution from purely charitable institutions into multifaceted conglomerates with significant market presence. Despite their economic reach, bonyads are widely perceived as overstaffed and inefficient organizations plagued by corruption and mismanagement. Critics argue that their operational models prioritize patronage and political loyalty over profitability and sound business practices. The lack of competitive pressures and the cushion of government subsidies have often led to bloated workforces and bureaucratic inefficiencies within these foundations. Moreover, allegations of corruption have been persistent, with accusations that resources are diverted for personal gain or political purposes rather than public benefit. The general unprofitability of many bonyad enterprises has raised concerns about their sustainability and the opportunity costs of their privileged economic position. The presence of bonyads in the commercial sector has generated tensions with Iran’s private businesses, which frequently complain about the challenges of competing against these subsidized and politically favored entities. Private sector entrepreneurs argue that bonyads benefit from unfair advantages, including exemptions from taxes and regulatory scrutiny, as well as access to cheap capital and government contracts. This uneven playing field undermines market competition and discourages private investment and innovation. The dominance of bonyads in certain industries can crowd out private enterprise, limiting economic diversification and growth. Such dynamics contribute to broader debates about the role of state-affiliated organizations in Iran’s economy and the need for reforms to enhance transparency and competitiveness. A significant factor contributing to the lack of accountability among bonyads is their exemption from standard auditing procedures and Iran’s conventional accounting laws. Unlike private companies and government agencies, bonyads are not subject to rigorous financial oversight or disclosure requirements, enabling them to operate with minimal transparency. This regulatory gap allows for the concealment of financial irregularities and hampers efforts to assess their true economic performance and social impact. The absence of external audits also complicates attempts to hold bonyad managers accountable for mismanagement or corruption. Consequently, the opacity surrounding their finances has become a major point of criticism from economists, reformists, and international observers concerned about governance and fiscal responsibility in Iran. Among the most prominent entities within the bonyad system is Setad, also known as the Execution of Imam Khomeini’s Order (EIKO), which functions as a multi-sector business organization controlling a vast portfolio of companies. Setad holds ownership of 37 companies spanning various industries, with an estimated total asset value of approximately $95 billion. This makes it one of the largest economic conglomerates in Iran, wielding significant influence across multiple sectors of the economy. Setad’s extensive holdings include real estate, telecommunications, energy, and manufacturing, reflecting its strategic role in consolidating economic resources under the control of the religious leadership. The organization’s scale and scope underscore the intertwining of political authority and economic power within the bonyad framework. Controlled directly by Iran’s Supreme Leader, Ali Khamenei, Setad was established through the confiscation of thousands of properties from Iranians, particularly in the aftermath of the 1979 Islamic Revolution. These properties were seized on grounds ranging from alleged opposition to the new regime to accusations of corruption or lack of compliance with Islamic law. Over time, Setad has expanded its asset base through further acquisitions and investments, becoming a central instrument for the Supreme Leader to exert economic influence independently of the formal government apparatus. The origins and growth of Setad highlight the complex relationship between political authority, property rights, and economic control in post-revolutionary Iran, illustrating how religious foundations have become entrenched economic powerhouses within the country’s political economy.

In 2003, the distribution of employment across various sectors in Iran reflected the diverse structure of the country’s labor market. Agriculture was the largest employer, engaging approximately 4,009,155 individuals, underscoring the sector’s continued importance despite gradual shifts toward industrialization and services. The combined category of social, personal, and household services alongside public service employed nearly 3,934,317 persons, indicating a significant portion of the workforce was involved in government functions and community-oriented roles. The mining and manufacturing sector, critical to Iran’s industrial base, provided jobs for 3,019,576 workers, highlighting the country’s reliance on resource extraction and industrial production. Trade, restaurants, and hotels collectively employed 2,820,927 people, reflecting the role of commerce and tourism-related activities in the economy. The construction and real estate services sector accounted for 2,395,144 jobs, demonstrating ongoing urban development and infrastructure expansion. Transportation, warehousing, and telecommunications sectors employed 1,541,401 individuals, emphasizing the importance of logistics and communication networks. Financial and monetary institutions, though smaller, employed 366,352 persons, representing the growing banking and finance industries. The oil and gas sector, despite its outsized contribution to national revenue, employed only 136,803 workers, illustrating its capital-intensive nature. The electricity sector employed 77,026 workers, while the water sector provided employment for 63,510 individuals, both sectors essential for supporting industrial and domestic needs. The total labor force in Iran in 2003 was estimated at approximately 18,364,211 persons, a figure that reflected the country’s demographic growth and economic activities. This sizable workforce faced structural challenges, including a notable shortage of skilled labor, which impeded productivity and economic diversification. The scarcity of adequately trained personnel in technical and specialized fields was a persistent issue, limiting the capacity of industries to modernize and compete globally. This deficiency in skilled labor was partly rooted in historical educational policies and economic constraints that affected workforce development. Following the 1979 Iranian Revolution, the government undertook significant reforms in the education sector, establishing a national education system aimed at increasing literacy and educational attainment across the population. These reforms were instrumental in raising adult literacy rates, contributing to improved human capital. By 2008, literacy among adults in Iran had reached approximately 85%, a substantial achievement that surpassed the regional average of 62%. This improvement in literacy was a critical factor in enhancing workforce quality and supporting economic development initiatives. The expansion of educational opportunities also played a role in increasing female participation in education and, subsequently, in the labor market. Iran’s advancements in human development were further reflected in its Human Development Index (HDI) score of 0.749 in 2013, which placed the country within the “high human development” category. This classification indicated progress in key areas such as education, health, and income, aligning Iran with countries that had achieved significant socio-economic development. The HDI score underscored the impact of governmental policies aimed at improving living standards and expanding access to essential services. Despite these gains, Iran faced considerable economic challenges related to its labor market dynamics. In 2008, it was estimated that the country required an annual economic growth rate exceeding 5% to effectively absorb approximately 750,000 new entrants into the labor force each year. This demographic pressure stemmed from a youthful population and high rates of labor force participation, necessitating robust economic expansion to provide sufficient employment opportunities. Failure to achieve such growth rates risked exacerbating unemployment and underemployment issues. By 2020, the agricultural sector contributed about 10% to Iran’s Gross Domestic Product (GDP) while employing roughly 16% of the labor force. This disproportionate employment share relative to output highlighted the sector’s lower productivity compared to industrial and service sectors. Agriculture remained a vital source of livelihood, particularly in rural areas, but its economic contribution was constrained by factors such as limited modernization, water scarcity, and land fragmentation. The industrial sector, encompassing mining, manufacturing, and construction, accounted for 35% of GDP and employed 35% of the labor force in 2017. This parity between output and employment suggested a more balanced productivity level within industry compared to agriculture. The sector’s prominence was driven by Iran’s rich mineral resources, expanding manufacturing base, and ongoing construction activities, which were essential for infrastructure development and urbanization. Despite mining employing less than 1% of the labor force, mineral products, particularly petroleum, dominated Iran’s export revenues. In 2009, mineral exports constituted approximately 80% of the country’s total export income, underscoring the critical role of the oil and gas industry in the national economy. This disparity between employment and export revenue reflected the capital-intensive nature of resource extraction and the strategic importance of hydrocarbons in Iran’s trade balance. The service sector emerged as the largest contributor to Iran’s GDP in 2004, accounting for 48% of economic output. It also employed 44% of the workforce, indicating its central role in the economy. Services such as retail, hospitality, telecommunications, finance, and public administration formed the backbone of this sector, supporting both domestic consumption and government functions. The growth of services was consistent with global economic trends toward increased reliance on tertiary activities. Women constituted approximately 33% of the labor force in 2005, marking a significant presence in the workforce despite cultural and structural barriers. Female participation varied across sectors, with higher representation in education, health services, and certain areas of manufacturing and services. However, women faced challenges related to employment opportunities, wage disparities, and workplace conditions, which limited their full integration into the labor market. Youth unemployment, particularly among individuals aged 15 to 24, was a pressing concern in Iran. In 2012, the youth unemployment rate stood at 29.1%, reflecting difficulties faced by young people in securing stable employment. This high level of unemployment contributed to a significant brain drain, as many educated and skilled young Iranians sought opportunities abroad, resulting in a loss of human capital and potential economic growth. In 2016, the Iranian government reported that approximately 40% of the public sector workforce was either in excess of requirements or deemed incompetent. This overstaffing and inefficiency within the public sector posed challenges for fiscal sustainability and service delivery. The government’s acknowledgment of these issues highlighted the need for public sector reform, including workforce rationalization and improved performance management to enhance productivity and reduce budgetary pressures.

The Islamic Republic of Iran’s labor force encompasses approximately eight million individuals engaged across a diverse array of economic sectors. Within this workforce, a significant portion—estimated at around three million people—occupy formal positions embedded within the core structures of the state, including the three branches of government, the armed forces, and various leadership institutions. These formal government roles comprise a broad spectrum of employment categories, ranging from bureaucratic staff and civil servants who manage the administrative functions of the state, to uniformed military personnel who serve in the country’s defense and security apparatus. The civil service sector, in particular, plays a critical role in policy implementation, public administration, and regulatory oversight, while the military and security forces contribute to national defense and internal stability, reflecting the centrality of state employment in Iran’s socio-political framework. Beyond these formal government positions, an additional segment of the labor force—approximately 2.3 million individuals—is employed within quasi-governmental organizations. These entities operate in a space that blurs the lines between the public and private sectors, often functioning under state supervision or ownership but with varying degrees of operational autonomy. This category includes state-owned enterprises, which dominate key industries such as oil and gas, petrochemicals, and heavy manufacturing, illustrating the government’s extensive involvement in the economy. National banks, another crucial component of this sector, serve as financial intermediaries that support both public and private economic activities, often facilitating government-directed development projects and credit allocation. Municipalities also form part of this quasi-governmental employment base, providing local governance, urban management, and public services across Iran’s cities and towns. Furthermore, the Islamic Azad University, a large private university system with close ties to the state, employs a substantial workforce engaged in higher education and research, highlighting the intersection of education and state influence within the labor market. Collectively, these quasi-governmental organizations represent a significant dimension of Iran’s employment landscape, reflecting the state’s pervasive role in economic and social spheres. In addition to active employment, the Iranian state maintains financial obligations toward a considerable number of pensioners, numbering approximately 2.5 million individuals who receive regular stipends from the government. These pension payments constitute a vital component of social welfare in Iran, providing income support to retired workers, disabled persons, and survivors of deceased employees. The distribution of these stipends often occurs through the Relief Committee, a government-controlled charitable organization tasked with administering social assistance programs and ensuring the delivery of benefits to eligible recipients. The Relief Committee’s role extends beyond pension disbursement, encompassing a range of charitable activities aimed at alleviating poverty and supporting vulnerable populations within the country. The existence of such a large pensioner population connected to the state underscores the enduring fiscal responsibilities of the government in sustaining social security systems amid economic challenges and demographic shifts. Taken together, these figures indicate that nearly one in ten Iranian citizens maintains a regular financial connection to the state, either through direct employment or pension stipends. This statistic highlights the extensive reach of the government in the economic lives of its population, reflecting a labor market structure where the public sector and its affiliated entities serve as major sources of income and economic security for a substantial segment of society. The intertwining of state employment, quasi-governmental organizations, and social welfare programs creates a complex web of financial dependencies that shape the dynamics of Iran’s labor force and public sector. This relationship also illustrates the broader socio-economic model pursued by the Islamic Republic, wherein state involvement remains a defining feature of the national economy and labor market, influencing patterns of employment, income distribution, and social protection across the country.

In 2010, Iran’s nominal per capita income was estimated to be approximately $4,520, reflecting the average income earned per person without adjustments for cost of living or inflation. By 2012, when measured using Purchasing Power Parity (PPP), the per capita income had increased substantially to around $13,000. This significant rise in PPP per capita income indicated that the real purchasing power of Iranian citizens had improved considerably, as PPP accounts for differences in price levels between countries, offering a more accurate comparison of living standards. The Gross National Income (GNI) per capita in 2012, when adjusted for PPP, was notably higher than the nominal figure recorded in 2010, underscoring a period of economic growth and enhanced domestic purchasing capacity within the country. When comparing Iran’s GNI per capita to other nations, it becomes evident that countries with more developed economies, such as those in Western Europe, North America, and parts of East Asia, generally exhibited higher GNI per capita figures. These countries benefited from more diversified industrial bases, advanced technological infrastructure, and higher productivity levels. Conversely, nations with lower GNI per capita than Iran typically included less developed countries, often characterized by limited industrialization, lower educational attainment, and constrained access to healthcare services. Iran’s position, therefore, as a middle-income country placed it between these two groups, reflecting a transitional economy with both developed and developing characteristics. Iran’s classification as a middle-income country was supported by its achievements in social development, particularly in the realms of health and education, during the timeframe encompassed by the Millennium Development Goals (MDGs). The government’s investments in healthcare infrastructure, vaccination programs, and educational access led to measurable improvements in life expectancy, infant mortality rates, and literacy levels. These advances contributed to enhancing human capital, which in turn supported economic growth and poverty reduction efforts. The progress made in these sectors highlighted Iran’s commitment to improving the quality of life for its population despite facing economic challenges and international sanctions. In 2010, the average monthly income for Iranian workers was approximately $500, which translated to an annual income of roughly $6,000. This average income level provided a baseline for understanding household earnings and consumption patterns across the country. The GNI per capita figure of $13,000 in 2012, measured by PPP, further indicated that the economy had experienced substantial growth over the preceding years, with increased output and improved income distribution contributing to higher standards of living. This growth was partly driven by Iran’s oil revenues, domestic industrial expansion, and government policies aimed at economic diversification. The establishment of a minimum national wage was a key labor policy implemented by the Supreme Labor Council, which set wage floors applicable across various economic sectors. In 2009, the minimum wage was approximately $263 per month, amounting to an annual income of $3,156. This wage floor aimed to protect low-income workers from exploitation and to ensure a basic standard of living, although it remained below the average income levels for many workers. The minimum wage also reflected the broader economic conditions and inflationary pressures faced by the Iranian economy during that period. Household expenditure patterns in 2001 revealed that approximately 20% of consumption was allocated to food, reflecting the essential nature of nutrition in household budgets. Fuel expenses accounted for about 32% of consumption, indicating the significant role of energy costs in Iranian households, possibly due to heating needs and transportation. Healthcare expenditures represented 12% of household consumption, underscoring the importance of medical services and health-related costs in family budgets. Education expenses comprised roughly 8%, highlighting the investment families made in schooling and higher education despite economic constraints. These expenditure patterns illustrated the priorities and economic pressures faced by Iranian households at the turn of the century. By 2015, personal debt levels among Iranians were generally minimal, suggesting a cautious approach to borrowing and credit use within the population. This low indebtedness could be attributed to cultural attitudes toward debt, limited access to consumer credit, or economic uncertainty that discouraged excessive borrowing. The minimal personal debt levels also indicated that many households relied primarily on income and savings for consumption and investment, rather than on credit expansion. Homeownership rates in Iran were relatively high, with data from 2007 showing that about 70% of Iranians owned their homes. This high rate of homeownership reflected both cultural preferences for property ownership and government policies that facilitated access to housing. It also indicated a degree of economic stability for a majority of households, as owning a home often serves as a key component of wealth accumulation and financial security. The prevalence of homeownership contributed to social cohesion and provided a buffer against economic shocks for many families. During the period from 2018 to 2019, the median household income in Iran was recorded at 434,905,000 rials, which was slightly above $3,300 when converted at prevailing exchange rates. This figure represented an 18.6% increase compared to the median household income of approximately 366,700,000 rials in 2017–2018, reflecting a notable rise in household earnings within a relatively short timeframe. The increase in median income suggested improvements in employment, wage levels, or inflation adjustments, although the overall economic context remained complex due to external pressures and domestic challenges. When adjusted for Purchasing Power Parity, Iran’s median household income for 2017–2018 was approximately $28,647, based on the 2017 private consumption conversion factor. This adjustment provided a more accurate reflection of the real income levels experienced by Iranian households by accounting for differences in price levels and cost of living. Given the average household size of 3.5 persons, the median personal income was estimated at around $8,185. This per capita income measure helped to contextualize individual economic well-being within the household structure, offering insights into consumption capacity and living standards. Despite these relatively favorable income levels, median wealth in Iran remained very low, comparable to countries such as Vietnam and Djibouti. This paradox highlighted the high expenditure levels faced by Iranian households, which limited their ability to accumulate wealth and savings. Factors contributing to low median wealth included inflationary pressures, limited access to investment opportunities, and the need to allocate significant portions of income toward essential consumption and debt servicing. The disparity between income and wealth underscored structural challenges in wealth distribution and financial security within the country. According to data from the Statistical Center of Iran (SCI), median household spending in 2018 was 393,227,000 rials, which amounted to approximately 90.5% of the median household income of 434,905,000 rials. This high proportion of income devoted to consumption expenses indicated that Iranian households operated with relatively narrow margins between earnings and expenditures. The close alignment between income and spending suggested limited capacity for saving or investment, reinforcing concerns about financial vulnerability and the sustainability of household economic well-being. Following the 1979 Islamic Revolution, the size of Iran’s middle class experienced significant growth, doubling from approximately 15% of the population in 1979 to over 32% by the year 2000. This expansion reflected broader social and economic changes, including increased access to education, urbanization, and the development of new professional and service sectors. However, despite the growth in size, the composition of the middle class remained relatively unchanged, with many individuals occupying similar occupational and income brackets as before. The growth of the middle class played a crucial role in shaping consumer markets, political dynamics, and social aspirations within Iran. In 2008, the official poverty line in Tehran, the capital city, was set at $9,612, reflecting the higher cost of living in the urban center. In contrast, the national average poverty line was established at $4,932, indicating significant regional disparities in income thresholds and living costs. These poverty lines served as benchmarks for assessing economic deprivation and guiding social welfare policies. The higher poverty line in Tehran underscored the challenges faced by urban residents in meeting basic needs amid rising housing and living expenses. By 2010, the Department of Statistics of Iran reported that approximately 10 million Iranians lived below the absolute poverty line, defined as the minimum income necessary to meet basic subsistence needs. Additionally, about 30 million people were classified as living under the relative poverty line, which considers income in relation to median national income and reflects broader social exclusion and deprivation. These figures highlighted the persistent challenges of poverty reduction in Iran, despite economic growth and social development efforts. The data underscored the need for targeted policies to address income inequality, improve social safety nets, and promote inclusive economic opportunities across different regions and demographic groups.

In 2002, Iran’s income inequality was measured by the World Bank’s inequality dataset, which reported a Gini index of 34.8. This figure suggested a relatively modest level of income disparity compared to many other nations, indicating that income distribution was not excessively skewed at a national level. The Gini index, a widely used statistical measure, ranges from 0 to 100, where 0 represents perfect equality and 100 signifies maximal inequality. A value of 34.8 placed Iran in a moderate position, implying that while income inequality existed, it was not as severe as in countries with higher Gini coefficients. However, this aggregate measure masked underlying complexities and disparities within the Iranian economy. A more detailed analysis of income distribution revealed a significant concentration of wealth among the highest earners. The top 10% of income earners in Iran controlled 52.7% of the national income, a proportion that was notably higher than that observed in the United States and many European countries. This concentration indicated that despite the moderate Gini index, a substantial share of the country’s wealth was held by a relatively small segment of the population. Such a distribution suggested the presence of entrenched economic elites and highlighted the limitations of relying solely on the Gini index to understand the nuances of income inequality. The disparity between the top earners and the rest of the population underscored the existence of significant economic stratification within Iranian society. Economic disparity was particularly pronounced within the public sector, where many state employees faced considerable financial hardships. Numerous government workers earned monthly salaries as low as $200, a figure that was insufficient to meet basic living expenses in an economy affected by inflation and fluctuating currency values. These low wages contributed to widespread economic insecurity among public sector workers, many of whom struggled to maintain a decent standard of living. The financial difficulties experienced by this segment of the workforce contrasted sharply with the earnings of higher-ranking officials and legislators, highlighting a stark divide within the state apparatus itself. Members of the Iranian Majlis, or parliament, received significantly higher compensation, with monthly salaries ranging from 200 to 250 million tomans. Based on the exchange rate in January 2024, this translated to more than $59,172 per month, an income level vastly exceeding that of ordinary public sector employees. The substantial remuneration of Majlis representatives reflected their privileged status within the political hierarchy and underscored the disparities in income and wealth between elected officials and the general populace. This disparity was further accentuated by additional financial benefits provided to parliamentarians. In addition to their base salaries, Majlis representatives received various supplementary financial benefits, including bonuses awarded during religious holidays and on special occasions such as “Parliament Day” and “Employee Day.” These bonuses served as additional sources of income, further enhancing the financial advantages enjoyed by members of parliament. The provision of such benefits not only increased the overall compensation of these officials but also symbolized the institutional privileges granted to political elites. These perks contributed to a broader pattern of economic inequality, where government officials enjoyed a range of benefits unavailable to most citizens. Beyond monetary compensation, officials also received various perquisites that highlighted disparities in access to cultural and festive amenities. For instance, during traditional celebrations such as Nowruz, the Persian New Year, and Yalda Night, government officials were often provided with festive treats and gifts. These perks served as markers of social status and privilege, reinforcing the divide between the economic elite and ordinary citizens. The availability of such benefits to officials contrasted sharply with the experiences of many Iranians who faced economic hardships and limited access to similar cultural resources. These disparities in living standards and access to non-monetary benefits illustrated the multifaceted nature of inequality in Iran. Income inequality in Iran extended beyond earnings and benefits to encompass access to essential services, notably the provision of water. In impoverished districts of Tehran, residents frequently encountered inadequate water supply and hazardous water quality, conditions that posed serious health risks and diminished quality of life. These underserved areas often lacked the infrastructure and resources necessary to ensure reliable access to clean water, reflecting broader patterns of spatial inequality within the capital city. The water shortages and contamination issues in these districts underscored the challenges faced by marginalized communities in securing basic necessities. By contrast, affluent districts in Tehran, which housed many of Iran’s economic elite, including high-ranking government officials and senior members of the Islamic Revolutionary Guard Corps (IRGC), were largely insulated from water shortages and quality problems. These neighborhoods benefited from superior infrastructure and prioritized resource allocation, ensuring consistent access to clean and safe water. The stark contrast between the water conditions in wealthy and impoverished areas illustrated the spatial dimensions of income inequality and resource distribution in Iran. The disparities in water access served as a tangible manifestation of broader socioeconomic inequalities, revealing how wealth and political influence translated into differential access to essential public services.

In 1996, the Iranian Center for Statistics estimated that over 73% of the population was covered by social security programs, reflecting a significant reach of social protection despite the absence of a universal social security system in the country. This coverage primarily included formal sector employees, as membership in the social security system was mandatory for all employees in Iran, ensuring broad participation among the workforce engaged in formal employment. The social security framework in Iran was designed to provide comprehensive protection to employees against various risks, including unemployment, illness, old age, and occupational accidents, thereby functioning as a critical safety net for the working population. These protections were intended to mitigate the economic vulnerabilities faced by workers and their families, contributing to social stability and economic security. In 2003, the Iranian government undertook a significant reform initiative aimed at consolidating its welfare organizations. This effort sought to reduce redundancy among overlapping agencies and improve the overall efficiency of social welfare delivery. By streamlining administrative structures and integrating services, the government aimed to enhance coordination and resource allocation within the social security system. Concurrently, the minimum standard pension in that year was established at 50% of the worker’s earnings, with a guaranteed floor set at the minimum wage level. This policy was designed to ensure a basic level of income security for retirees, reflecting an effort to balance fiscal sustainability with social welfare objectives. The financial commitment to social welfare programs was substantial, with Iran allocating 22.5% of its national budget in 2003 to social welfare expenditures. More than half of this allocation was dedicated specifically to pension costs, underscoring the prominence of retirement benefits within the social security framework. This significant budgetary emphasis highlighted the government’s prioritization of supporting the elderly population and maintaining the solvency of pension funds. The focus on pension payments also reflected demographic trends and the growing number of retirees requiring financial support. By 2015, the social challenges faced by vulnerable populations remained evident, with approximately 15,000 homeless individuals identified in Iran, including 5,000 women. This statistic illustrated ongoing social welfare concerns related to housing insecurity and poverty, which persisted despite the extensive coverage of formal social security programs. The presence of a substantial homeless population pointed to gaps in social protection, particularly for marginalized groups outside the formal employment sector. Coverage under the social security system extended to employees aged between 18 and 65, encompassing the majority of the working-age population. The financing of the system was structured as a tripartite arrangement involving contributions from employees, employers, and the state. Employees were required to contribute 7% of their salary to the social security fund, while employers contributed a higher rate ranging from 20% to 23%, reflecting their greater financial responsibility in supporting social protection mechanisms. Additionally, the government supplemented the employer contribution by up to an extra 3%, providing further fiscal support to maintain the system’s viability. This shared financing model was intended to distribute the costs of social security equitably among stakeholders and ensure the sustainability of benefits. The state’s role extended beyond supplementing employer contributions; it also made direct financial contributions to social security funding to help cover costs associated with the program. This government involvement was crucial in addressing funding gaps and maintaining the solvency of social security funds, particularly in times of economic strain or demographic shifts. The state’s financial support underscored its commitment to social welfare and the recognition of social security as a public responsibility. For self-employed workers, participation in the social security system was voluntary, with contribution rates varying between 12% and 18% of their declared income. The level of contribution depended on the extent of protection the individual sought, allowing self-employed persons to tailor their social security coverage according to their financial capacity and risk preferences. This voluntary scheme aimed to extend social protection to a broader segment of the labor force, including those outside formal employment relationships, thereby promoting inclusivity within the social security framework. Distinct from the general social security system, civil servants, regular military personnel, law enforcement agencies, and members of the Islamic Revolutionary Guard Corps (IRGC) were covered by separate pension systems. These specialized schemes were designed to address the unique employment conditions and service requirements of these groups, often providing differentiated benefits and retirement conditions. The existence of multiple pension systems reflected the segmented nature of social protection in Iran, with separate arrangements tailored to various categories of public sector workers and security forces. This segmentation also highlighted the complexities involved in managing social security across diverse sectors of the Iranian workforce.

Although Iranian workers have a theoretical right to form labor unions, the country has lacked a fully operational and independent union system. While the constitution and labor laws nominally guarantee the freedom to organize, in practice, the formation of autonomous labor unions has been severely restricted by the state. The government maintains tight control over labor organizations, limiting their scope and ability to advocate effectively on behalf of workers. This constrained environment has prevented the emergence of a vibrant, grassroots union movement capable of negotiating collectively or influencing labor policy in a meaningful way. Worker representation in Iran is primarily provided by the Workers’ House (Khaneh Kargar), an institution established in the aftermath of the 1979 Islamic Revolution. Although officially designed to represent workers’ interests, the Workers’ House operates as a state-sponsored entity with close ties to the government and the Islamic Republic’s political framework. It attempts to challenge certain government policies and advocate for workers within the parameters set by the authorities, but its independence is limited. The organization often functions more as an intermediary between the state and the workforce rather than as an autonomous labor union, which restricts its ability to mobilize workers or engage in confrontational labor activism. In addition to the Workers’ House, guild unions exist at the local level throughout most regions of Iran. These guild unions primarily serve traditional and small-scale trades, such as artisans, shopkeepers, and various service providers. Their activities are largely confined to administrative functions, including the issuance of credentials and licenses necessary for practicing certain trades. However, their influence on broader labor issues, such as wage negotiations, working conditions, or labor rights advocacy, remains minimal. These guild unions operate within a framework that emphasizes regulation and control rather than collective bargaining or worker empowerment, limiting their role in shaping labor relations on a national scale. The right to strike, a fundamental aspect of labor rights in many countries, is generally not recognized or respected by the Iranian state. Since the 1979 Islamic Revolution, strikes have been met with significant repression, often suppressed through police and security force intervention. Workers who organize or participate in strikes risk arrest, intimidation, and other punitive measures. The government views strikes as a threat to social order and economic stability, leading to a restrictive approach that curtails workers’ ability to use industrial action as a tool for negotiating better conditions or protesting grievances. This suppression has contributed to an environment where labor unrest is frequently driven underground or expressed through informal and spontaneous actions rather than organized collective efforts. Iran’s labor relations are governed by a comprehensive labor law that outlines the rights and responsibilities of employers and employees. This legal framework includes provisions for the employment of foreign workers, reflecting Iran’s role as a destination for migrant labor in the region. The law aims to regulate various aspects of employment, including contracts, working hours, wages, occupational safety, and dispute resolution. It establishes the parameters within which labor relations must operate, providing a structured approach to managing employment relationships across different sectors of the economy. The labor law provides a broad and inclusive definition of the individuals it covers, recognizing various forms of employment contracts. It explicitly includes workers engaged under written, oral, temporary, and indefinite contracts, thereby extending legal protections to a wide spectrum of employment arrangements. This inclusivity ensures that even workers without formal written agreements receive certain rights and benefits under the law. By encompassing diverse contractual relationships, the legislation attempts to address the realities of the Iranian labor market, where informal and temporary work arrangements are common. Considered employee-friendly by many observers, the labor law imposes significant restrictions on employers’ ability to dismiss staff. It prohibits the use of consecutive six-month contracts as a means to circumvent the obligation to provide benefits and job security, thereby protecting workers from exploitative employment practices. Employers are required to adhere to strict criteria when terminating employment, and dismissals without just cause are illegal. This legal framework seeks to promote job stability and protect workers from arbitrary or unjustified termination, reinforcing the principle of fair treatment in the workplace. Under Iranian labor law, dismissing staff without proof of a serious offense is prohibited. Employers must demonstrate valid grounds, such as misconduct or failure to perform duties, to justify termination. This requirement provides workers with a degree of legal protection against unfair dismissal and ensures that employment termination follows due process. The law’s emphasis on protecting employees from unjustified dismissal reflects broader labor policy goals aimed at safeguarding workers’ rights and maintaining industrial harmony. Labor disputes in Iran are resolved through a specialized labor council, which functions as a quasi-judicial body dedicated to addressing conflicts between employers and employees. This council typically rules in favor of the employee, reflecting the protective orientation of Iranian labor law toward workers. The council’s decisions are binding and provide a formal mechanism for dispute resolution outside the conventional court system. By adjudicating labor conflicts in a manner that favors employees, the council contributes to enforcing labor rights and mitigating workplace disputes, thereby enhancing the legal protections available to Iranian workers.

Wheat has historically been the most important crop cultivated in Iran, with its primary production concentrated in the western and northwestern regions of the country. These areas benefit from favorable climatic and soil conditions conducive to wheat cultivation, making them central to the nation’s grain supply. In contrast, rice cultivation is predominantly localized in the Caspian region, where the humid subtropical climate and abundant water resources create an ideal environment for paddy fields. This regional specialization in crop production reflects the diverse agroecological zones within Iran, allowing for a variety of crops to be grown according to local conditions. Agriculture plays a significant role in Iran’s economy, contributing approximately 9.5% to the country’s gross domestic product (GDP). This sector also provides employment for about 17% of the total labor force, underscoring its importance as a livelihood source for a substantial portion of the population. Despite the relatively modest share of GDP, agriculture remains vital for food security and rural development. Approximately 9% of Iran’s total land area is classified as arable, with key food-producing zones located primarily in the Caspian region and the fertile valleys of the northwest. These areas are characterized by more favorable precipitation patterns and soil fertility compared to the arid and semi-arid regions that dominate much of the country. Agricultural practices in Iran vary considerably depending on geographic and climatic factors. Some northern and western areas rely predominantly on rain-fed agriculture, where crop cultivation depends on natural precipitation. In contrast, other regions depend heavily on irrigation systems to sustain crop growth, particularly in drier zones where rainfall is insufficient. The reliance on irrigation has necessitated the development of extensive water management infrastructure to support agricultural productivity. Several principal obstacles have historically limited the expansion and efficiency of Iran’s agricultural sector. Primitive farming methods, which have persisted in some rural areas, restrict the potential for higher yields and modern agronomic practices. Additionally, overworked and under-fertilized soils have led to declining soil fertility, further constraining productivity. The quality of seeds available to farmers has often been poor, limiting crop performance and resilience. Water scarcity remains a critical challenge, exacerbated by the country’s arid climate and competing demands from urban and industrial sectors. To address water limitations, approximately one-third of Iran’s cultivated land is irrigated. The expansion of irrigation infrastructure has been facilitated by the construction of multipurpose dams and reservoirs along rivers flowing through the Zagros and Alborz mountain ranges. These engineering projects have not only provided water storage and flood control but also enabled more reliable water delivery for agriculture, thereby increasing the area of irrigated farmland and stabilizing crop production. Agricultural production in Iran has shown a rising trend due to concerted modernization efforts. Mechanization has been introduced to replace traditional labor-intensive methods, improving efficiency and timeliness in farming operations. Crop and livestock improvements, including the development of higher-yielding and disease-resistant varieties, have contributed to enhanced productivity. Land redistribution programs implemented over the decades have aimed to create more equitable landholding patterns, supporting smallholder farmers and encouraging investment in agricultural inputs and technologies. Beyond wheat, Iran cultivates a diverse array of crops that contribute to both domestic consumption and export markets. Barley, corn, cotton, sugar beets, tea, hemp, and tobacco are among the significant field crops grown. The country also produces a wide variety of fruits, potatoes, legumes such as beans and lentils, vegetables, and fodder plants including alfalfa and clover, which support the livestock sector. Tree nuts like almonds and walnuts are cultivated alongside spices such as cumin and sumac, reflecting the agricultural diversity shaped by Iran’s varied climates and soils. Iran holds a prominent position in global agricultural production for several specialty crops. It is the world’s largest producer of saffron, pistachios, honey, berberis (barberries), and various berries. Additionally, Iran ranks as the second-largest producer of dates worldwide, underscoring the importance of these high-value crops to the national economy and export earnings. The cultivation of these products often involves traditional knowledge and practices, combined with modern agricultural techniques to optimize yield and quality. The country’s meat and dairy sectors produce a range of animal products that are integral to the Iranian diet. These include lamb, goat meat, beef, and poultry, alongside dairy products such as milk, eggs, butter, and cheese. Livestock farming complements crop production, with fodder crops grown specifically to sustain animal husbandry. This integrated approach supports rural livelihoods and contributes to food security. Non-food agricultural products also contribute to Iran’s rural economy. Wool, leather, and silk are notable outputs derived from animal husbandry and sericulture. These materials serve both domestic manufacturing industries and export markets, providing additional income streams for farmers and artisans. Forestry products from the northern slopes of the Alborz Mountains hold economic significance due to the region’s forest resources. The government exercises strict control over tree-cutting activities to prevent deforestation and environmental degradation. A reforestation program has been implemented to restore forest cover and maintain ecological balance, reflecting a commitment to sustainable forest management. The rivers draining into the Caspian Sea support a productive fishing industry, harvesting species such as salmon, carp, trout, pike, and sturgeon. Of particular economic importance is the sturgeon fishery, which provides caviar—a luxury product for which Iran is the largest producer globally. The management of these fisheries involves balancing economic interests with conservation efforts to ensure the sustainability of fish stocks. Since the 1979 Islamic Revolution, commercial farming has increasingly supplanted subsistence farming as the dominant mode of agricultural production in Iran. This shift has been driven by government policies promoting market-oriented agriculture, mechanization, and improved access to inputs and credit. By 1997, the gross value of agricultural output had reached approximately $25 billion, reflecting the sector’s growth and modernization. Iran has achieved a high degree of self-sufficiency in essential agricultural products, estimated at around 90%. However, rice production remains limited relative to domestic demand, necessitating significant imports to meet consumption needs. Notably, in 2007, Iran attained self-sufficiency in wheat production and, for the first time, became a net exporter of wheat. This milestone underscored the success of agricultural policies aimed at enhancing grain production and reducing reliance on imports. By 2003, agricultural products constituted about 25% of Iran’s non-oil exports, highlighting the sector’s importance in foreign trade. Exports included fresh and dried fruits, nuts, animal hides, processed foods, and spices, reflecting the diversity and value-added potential of Iranian agriculture. The export value of foodstuffs reached $736 million in 2007 and increased to approximately $1 billion, or around 600,000 tonnes, by 2010, demonstrating the sector’s expanding role in the national economy. The food industry in Iran comprises a substantial number of entities, with a total of 12,198 companies involved in food production and processing. These entities represent 12% of all firms within the broader industrial sector, indicating the prominence of food-related industries. Employment in this sector is significant, with roughly 328,000 individuals working in food industry jobs, accounting for 16.1% of the entire industrial workforce. This employment level reflects the sector’s capacity to generate jobs and contribute to economic development beyond primary agricultural production.

Iran possesses a diversified and extensive industrial base, reflecting a complex and multifaceted economy that the United Nations classified as “semi-developed” in 1998. This classification underscored Iran’s transitional status between developing and developed economies, highlighting its significant industrial capabilities alongside ongoing challenges in modernization and economic infrastructure. The foundation for large-scale factory manufacturing in Iran was laid in the 1920s, marking the beginning of a gradual but steady industrial expansion. This period saw the establishment of various manufacturing facilities aimed at reducing the country’s reliance on imported goods and fostering domestic production capacities. The industrial sector faced considerable setbacks during the Iran–Iraq War, which lasted from 1980 to 1988. Throughout the conflict, Iraqi forces targeted Iran’s critical petrochemical infrastructure, inflicting severe damage on numerous plants. Among the most significant losses was the large oil refinery at Abadan, one of the world’s largest at the time, which was bombed extensively and brought production to a complete halt. The destruction of such vital facilities not only disrupted Iran’s oil refining capabilities but also had a cascading effect on related industries and the broader economy. Following the cessation of hostilities in 1988, Iran embarked on an ambitious reconstruction program to restore its petrochemical infrastructure. This effort culminated in the resumption of production by 1993, marking a critical milestone in the country’s post-war recovery and industrial revitalization. Despite the widespread destruction wrought by the war, Iran’s industrial sector demonstrated resilience through the emergence of numerous small factories. These enterprises primarily focused on producing import-substitution goods, aiming to replace foreign products with domestically manufactured alternatives. Additionally, many of these smaller factories contributed to the production of military materials, supporting Iran’s defense needs during and after the conflict. This dual focus on civilian and military manufacturing helped sustain industrial activity during a period of significant economic disruption and laid the groundwork for future industrial diversification. Iran’s manufacturing landscape is dominated by several major product categories, with petrochemicals, steel, and copper products constituting the core of its industrial output. The petrochemical sector, benefiting from the country’s abundant hydrocarbon resources, has been a central pillar of industrial development, producing a wide range of chemical products for both domestic consumption and export. Steel and copper manufacturing also play crucial roles, supported by Iran’s substantial mineral reserves and metallurgical expertise. These sectors not only supply raw materials for construction and manufacturing but also contribute significantly to employment and technological advancement. Beyond these primary industries, Iran has developed substantial manufacturing capabilities in other areas, including the production of automobiles, home and electric appliances, telecommunications equipment, cement, and industrial machinery. The automotive industry, in particular, has grown to become one of the largest in the Middle East, with domestic manufacturers producing a variety of vehicles ranging from passenger cars to commercial trucks. The production of home appliances and telecommunications equipment reflects ongoing efforts to meet domestic demand and reduce dependency on imports. Cement and industrial machinery manufacturing further illustrate the breadth of Iran’s industrial base, supporting infrastructure development and various sectors of the economy. Iran also operates the largest operational population of industrial robots in West Asia, indicating a significant degree of automation and technological integration within its manufacturing processes. The use of industrial robotics enhances productivity, precision, and efficiency across multiple industries, from automotive assembly lines to electronics manufacturing. This technological adoption positions Iran as a regional leader in industrial automation, contributing to its competitive advantage in the manufacturing sector. Additional manufactured goods produced in Iran include paper, rubber products, processed foods, leather products, and pharmaceuticals. These industries cater to both domestic markets and export opportunities, reflecting the country’s diverse industrial capabilities. The pharmaceutical sector, in particular, has seen notable growth, supported by investments in research and development and a focus on producing generic and specialized medications to meet national health needs. In the year 2000, Iran’s textile industry employed approximately 400,000 people, particularly in mills utilizing domestic cotton and wool. Prominent textile companies such as Tehran Patou and Iran Termeh operated in key regions including Tehran, Isfahan, and areas along the Caspian coast. This sector has historically been an important source of employment and economic activity, producing a variety of fabrics and finished textile products that serve both domestic consumption and export markets. The reliance on domestic raw materials underscores the integration of agricultural and industrial sectors in Iran’s economy. Among the notable industrial achievements is the manufacture of a giant fractionating column by Machine Sazi Arak (MSA), a prominent Iranian heavy machinery company. Fractionating columns are critical components in petrochemical and refining processes, used to separate mixtures into their constituent parts based on boiling points. The production of such large and complex industrial equipment domestically demonstrates Iran’s advanced engineering capabilities and its capacity to support the petrochemical sector with indigenous technology. A 2003 report by the United Nations Industrial Development Organization (UNIDO) identified several impediments to the development of small and medium-sized enterprises (SMEs) in Iran. These challenges included the lack of monitoring institutions necessary for effective oversight and support, an inefficient banking system that limited access to credit and financial services, and insufficient investment in research and development (R&D), which constrained innovation. Additionally, the report highlighted a shortage of managerial skills critical for enterprise growth, pervasive corruption that undermined business confidence, and inefficient taxation policies that complicated financial planning for SMEs. Socio-cultural apprehensions also played a role in hindering SME development, reflecting societal attitudes that may discourage entrepreneurial risk-taking or innovation. The absence of social learning loops—mechanisms through which businesses learn from each other and adapt to changing environments—further limited the dynamism of the SME sector. Moreover, shortcomings in international market awareness impeded the ability of Iranian SMEs to compete globally, while cumbersome bureaucratic procedures created additional barriers to business operations. The report also noted a shortage of skilled labor, lack of intellectual property protection, and inadequate social capital, social responsibility, and socio-cultural values as significant obstacles to SME growth. Despite these multifaceted challenges, Iran has made considerable advancements in various scientific and technological fields. The petrochemical sector has continued to evolve, incorporating new technologies and expanding production capacities. The pharmaceutical industry has developed increased capabilities in drug manufacturing and research. Aerospace and defense sectors have seen significant progress, with Iran developing indigenous technologies and products in response to regional security concerns and international sanctions. Heavy industry sectors, including machinery and metallurgy, have also benefited from technological improvements and increased domestic expertise. Even under the constraints imposed by economic sanctions, Iran is emerging as an industrialized country. The sanctions have limited access to international markets and technology transfers, yet the country’s industrial base has demonstrated resilience and adaptability. Through a combination of domestic innovation, import substitution, and strategic investment, Iran continues to expand its manufacturing capabilities and strengthen its industrial infrastructure. This trajectory suggests a gradual but steady movement toward greater industrialization, positioning Iran as a significant player in regional and global manufacturing networks.

Iran possesses a rich and enduring heritage in the production of artisanal goods, encompassing a diverse array of crafts such as Persian carpets, ceramics, copperware, brassware, glassware, leather products, textiles, and wooden artifacts. This multifaceted tradition reflects centuries of skilled craftsmanship and cultural expression, with many of these crafts tracing their origins back to ancient times. Among these, Persian carpet weaving stands out as one of the most historically significant and culturally emblematic industries. The art of carpet weaving in Iran predates the advent of Islam, indicating that its roots extend into the pre-Islamic era, thereby underscoring the deep historical continuity and cultural importance of this craft within Iranian society. The tradition of Persian carpet weaving has evolved over millennia, incorporating intricate designs and techniques that have been passed down through generations. This craft remains a vital economic activity, particularly in rural areas where it provides a substantial source of income for many families. Carpet weaving not only preserves cultural heritage but also serves as a critical livelihood for a significant portion of the population. It is estimated that approximately 1.2 million weavers across Iran are actively engaged in the production of carpets. These artisans create carpets both for domestic use and for export, catering to a global market that highly values the quality and artistry of Persian carpets. Iran’s hand-woven carpets hold a prominent position in international trade, with annual exports exceeding $500 million in value. This substantial figure highlights the importance of carpet weaving as a major contributor to the country’s export economy. The global demand for Iranian carpets has remained strong, in part due to their reputation for exceptional craftsmanship, unique designs, and the use of high-quality materials. In 2008, Iranian carpets accounted for approximately 30% of the world market for hand-woven carpets, a testament to their dominant presence and influence in the global handicraft industry. This significant market share illustrates the enduring appeal and competitive advantage of Iranian carpets in the international arena. Beyond carpet weaving, the broader handicraft sector in Iran encompasses a wide range of artisanal fields. Approximately 5.2 million people are employed across nearly 250 different handicraft disciplines, reflecting the sector’s extensive reach and diversity. These crafts include the production of ceramics, metalwork such as copperware and brassware, glassmaking, leather crafting, textile production, and the creation of wooden artifacts. Each of these fields contributes to the preservation of traditional skills and the promotion of cultural identity, while also providing employment opportunities and supporting local economies throughout the country. The handicraft sector as a whole plays a meaningful role in Iran’s economy, contributing roughly 3% to the nation’s gross domestic product (GDP). This contribution underscores the economic significance of artisanal industries alongside other sectors such as agriculture, manufacturing, and services. The handicrafts industry not only sustains cultural heritage but also fosters economic development by generating income, creating jobs, and facilitating exports. In rural and urban areas alike, handicraft production remains an essential component of Iran’s economic fabric, linking traditional artistry with contemporary market demands. Through continued support and promotion, Iran’s handicraft sector maintains its position as a vital and vibrant element of the country’s economic and cultural landscape.

Iran Khodro is recognized as the largest car manufacturer in the Middle East, holding a dominant position not only within Iran but also extending its influence across four continents through strategic joint ventures with foreign partners. This extensive international presence has allowed Iran Khodro to leverage global technologies and market access, thereby bolstering its manufacturing capabilities and export potential. The company’s collaborations with various international automotive firms have facilitated technology transfer, improved production standards, and enabled the introduction of new vehicle models tailored to diverse markets. These partnerships have been instrumental in positioning Iran Khodro as a key player in the global automotive industry, reflecting its ambition to transcend regional boundaries and compete on a global scale. As of 2001, Iran’s automotive industry was composed of 13 public and privately owned automakers, reflecting a relatively concentrated but diverse manufacturing base. Among these, Iran Khodro and Saipa emerged as the leading entities, collectively accounting for an overwhelming 94% of domestic vehicle production. This duopoly underscored the significant market share and production capacity controlled by these two manufacturers, which dominated the industry landscape. The remaining automakers, although smaller in scale, contributed to the industry’s breadth by producing specialized vehicles and serving niche markets. The presence of both public and private companies within the sector illustrated the mixed ownership structure prevalent in Iran’s automotive industry, which combined state influence with private enterprise dynamics. The predominant vehicle brand produced by Iran Khodro for many years was the Paykan, a model that became emblematic of the Iranian automotive landscape. The Paykan, originally based on the Hillman Hunter, was produced for several decades and became a cultural icon within Iran due to its widespread use and affordability. However, by 2005, Iran Khodro phased out the Paykan and replaced it with the Samand model, signaling a shift towards more modern vehicle designs and technological advancements. The Samand was developed as a domestically designed car, intended to serve as a national car for Iran and to showcase the country’s growing automotive engineering capabilities. This transition marked a significant milestone in the industry’s evolution, reflecting efforts to modernize the vehicle fleet and reduce reliance on older, foreign-based designs. In 2001, Iran Khodro held a commanding 61% share of the domestic automotive market, solidifying its position as the largest manufacturer in the country. Saipa followed with a substantial 33% market share, demonstrating its role as the second major player in the industry. Together, these two companies dominated the Iranian automotive market, controlling nearly all vehicle production and sales within the country. This concentration of market power allowed both firms to influence industry trends, pricing, and product development significantly. The dominance of Iran Khodro and Saipa also reflected their extensive production facilities, broad product portfolios, and established distribution networks, which smaller competitors struggled to match. The remaining 6% of the market in 2001 was distributed among several other automakers, including the Bahman Group, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and additional manufacturers. Although these companies held relatively small shares individually, collectively they contributed to the diversity of the automotive sector by producing specialized vehicles and catering to specific market segments. For instance, some focused on commercial vehicles, others on niche passenger cars or heavy-duty trucks, thereby complementing the offerings of the dominant manufacturers. This fragmentation among smaller producers highlighted the varied nature of Iran’s automotive industry, where multiple players operated alongside the leading firms to meet the diverse transportation needs of the country. Iranian automakers produced a wide and diverse array of vehicles, encompassing motorbikes, passenger cars, vans, mini trucks, medium-sized trucks, heavy trucks, minibuses, large buses, and other heavy-duty vehicles. This broad product spectrum enabled manufacturers to serve both commercial and private sectors effectively. For example, Saipa’s production of the Tiba model represented efforts to offer affordable, compact passenger cars suitable for urban use, while larger vehicles such as heavy trucks and buses catered to transportation and logistics industries. The capability to manufacture such a variety of vehicles demonstrated the industry’s technical versatility and its importance in supporting Iran’s economic infrastructure. This diversity also reflected the demand patterns within Iran, where both individual consumers and businesses required different types of vehicles for mobility and commerce. In 2009, Iran achieved a remarkable milestone by ranking fifth globally in car production growth, following China, Taiwan, Romania, and India. This rapid expansion underscored the dynamic nature of Iran’s automotive sector during that period, driven by increasing domestic demand, government support, and ongoing industrial development. The high growth rate indicated that Iran was becoming an increasingly significant player in the global automotive market, with production volumes rising swiftly compared to many other countries. This achievement also highlighted the success of policies aimed at boosting local manufacturing capacity, improving technology, and expanding the range of vehicles produced domestically. By 2010, Iran had ascended to become the 12th largest automaker in the world, operating a fleet of approximately 11.5 million cars. This ranking reflected the cumulative growth and maturation of the Iranian automotive industry over preceding decades. The size of the vehicle fleet indicated the scale of automobile penetration within the country and the importance of the automotive sector to Iran’s overall economy. The position as the 12th largest automaker globally also demonstrated Iran’s competitiveness in the international arena, despite challenges such as sanctions and economic fluctuations. The substantial domestic fleet underscored the critical role of the automotive industry in transportation, employment, and industrial output. In 2010, total vehicle production in Iran reached 1,395,421 units, which included 35,901 commercial vehicles. This production volume represented a significant output level, reflecting the industry’s capacity to meet both consumer and commercial transportation needs. The inclusion of nearly 36,000 commercial vehicles in the total production underscored the sector’s role in supporting logistics, freight, and public transportation services. The high production figures were indicative of the industry’s operational scale, the effectiveness of manufacturing infrastructure, and the sustained demand for vehicles within the country. This level of output positioned Iran as a key automotive manufacturing hub in the region, capable of producing a wide range of vehicles to serve diverse market segments.

In 2007, the International Institute for Strategic Studies (IISS) estimated Iran’s defense budget to be approximately $7.31 billion, reflecting the country’s significant allocation of resources toward its military capabilities. This budget accounted for roughly 2.6 percent of Iran’s Gross Domestic Product (GDP), indicating a substantial commitment relative to the size of its economy. When analyzed on a per capita basis, the defense expenditure amounted to about $102 per individual, underscoring the prioritization of defense spending within the national budget. Globally, Iran’s defense budget ranked as the 25th largest in 2007, placing it among the more prominent military spenders worldwide despite economic sanctions and international pressures. Iran’s defense industry is characterized by its broad and diverse manufacturing capabilities, producing an extensive array of arms and military equipment domestically. This industrial capacity emerged in response to the need for self-sufficiency, especially following the Iran-Iraq War and subsequent international embargoes that limited access to foreign military technology. Since 1992, the Defense Industries Organization (DIO) has served as the central entity overseeing the production of various military hardware, playing a pivotal role in advancing Iran’s indigenous defense manufacturing capabilities. The DIO’s portfolio includes the production of tanks and armored personnel carriers, which form the backbone of Iran’s ground forces, enhancing mobility and protection in combat scenarios. Beyond ground vehicles, the DIO has developed guided missile technology, which has become a cornerstone of Iran’s strategic deterrence and power projection. The organization has also produced radar systems essential for air defense and battlefield awareness, contributing to the country’s layered defense architecture. In the naval domain, the DIO has manufactured guided missile destroyers, military vessels, and submarines, enabling Iran to assert its presence and safeguard its interests in the Persian Gulf and beyond. Furthermore, the production of fighter aircraft by the DIO reflects Iran’s efforts to maintain a credible air force despite restrictions on importing advanced military jets. Iran’s defense industry has not only catered to domestic needs but has also engaged in arms exports, expanding its influence through military sales. In 2006, Iran exported weapons to 57 countries, a diverse clientele that notably included members of the North Atlantic Treaty Organization (NATO). This wide-reaching export network demonstrated Iran’s ability to supply military hardware internationally despite geopolitical challenges. The total value of Iran’s arms exports in 2006 was estimated at $100 million, highlighting the economic dimension of its defense industry and its role as a regional arms supplier. Among Iran’s notable technological advancements is the development of the Bavar 373, a sophisticated mobile air defense system designed to counter aerial threats. This system represents a significant achievement in Iran’s defense technology, combining radar, missile guidance, and mobility to provide a robust shield against enemy aircraft and missiles. The Bavar 373 is often compared to advanced air defense systems globally, illustrating Iran’s ambition to develop indigenous solutions capable of defending its airspace effectively. This development underscores the broader trend within Iran’s defense industry toward self-reliance and technological innovation, driven by the imperatives of national security and strategic autonomy.

Until the early 1950s, construction activities in Iran were predominantly undertaken by small domestic companies, with limited participation from large-scale firms. The construction sector at this time was relatively modest in scale and scope, reflecting the broader economic and industrial conditions of the country. Most building projects were localized and relied heavily on traditional methods and materials, with few instances of modern engineering or expansive urban development. Large construction enterprises had yet to establish a significant presence, and the industry was characterized by a fragmented landscape of small contractors serving local communities and modest infrastructure needs. The discovery and subsequent exploitation of Iran’s vast oil and gas reserves marked a transformative period for the nation’s economy, leading to a substantial increase in national income. This newfound wealth, combined with the availability of easy credit, catalyzed a significant building boom across the country. The oil revenues provided the government and private sector with unprecedented financial resources, enabling large-scale investments in infrastructure, residential, and commercial construction. The availability of credit facilitated access to capital for developers and contractors, further accelerating construction activities. This period witnessed a surge in demand for modern buildings, urban expansion, and the development of new industrial and commercial facilities, fundamentally reshaping Iran’s built environment. The construction boom that followed attracted numerous international construction firms to Iran, drawn by the lucrative opportunities presented by the country’s rapid economic growth and urbanization. Foreign companies brought advanced technologies, engineering expertise, and project management skills that complemented domestic capabilities. These international firms often partnered with local contractors or operated independently on large-scale projects, contributing to the modernization of Iran’s construction industry. Their involvement not only enhanced the technical quality and scale of construction projects but also facilitated knowledge transfer and the adoption of global best practices within the Iranian construction sector. This period of rapid construction growth persisted until the mid-1970s when it was abruptly halted by adverse economic conditions. A sharp rise in inflation, coupled with a tightening of credit availability, precipitated a credit squeeze that severely constrained investment in construction. The inflationary pressures eroded purchasing power and increased costs, while the credit squeeze limited the flow of funds necessary for ongoing and new projects. These factors combined to cause a collapse of the growth period, stalling many construction initiatives and leading to a slowdown in the industry. The sudden downturn underscored the vulnerability of the construction sector to macroeconomic fluctuations and financial instability. By the mid-1980s, the construction industry in Iran had experienced a degree of revival, although it continued to face significant challenges. Persistent housing shortages remained a critical issue, particularly in large urban centers where population growth and urban migration intensified demand for residential units. Additionally, real estate speculation became prevalent, contributing to price volatility and complicating efforts to provide affordable housing. Despite these obstacles, construction activity gradually resumed, supported by government initiatives and a recovering economy. However, the sector’s recovery was uneven, and the underlying structural problems of housing supply and market speculation remained unresolved. As of January 2011, Iran’s banking sector played a pivotal role in supporting construction and housing development, notably through the activities of Bank Maskan. This specialized housing bank had extended loans totaling up to 102 trillion rials, equivalent to approximately $10.2 billion, to applicants of the Mehr housing scheme. The Mehr housing scheme was a government initiative aimed at addressing the housing shortage by providing affordable residential units to low- and middle-income families. The substantial volume of loans disbursed by Bank Maskan underscored the importance of financial institutions in facilitating access to credit for construction projects and homebuyers, thereby stimulating activity in the real estate market and contributing to the expansion of housing stock. Construction remains a vital sector within Iran’s economy, accounting for a significant proportion of total private investment in urban areas. Estimates indicate that construction activities represent between 20% and 50% of private investment, highlighting the sector’s central role in economic development and urban growth. This wide range reflects variations across different regions and periods, but consistently demonstrates construction as a key driver of capital allocation and employment. The sector’s prominence is further reinforced by its extensive linkages with other industries, such as manufacturing, materials supply, and financial services, making it a cornerstone of Iran’s broader economic landscape. Historically, the construction industry has been a prime target for investment by affluent Iranians seeking profitable ventures. The sector’s potential for high returns, driven by ongoing urbanization and housing demand, attracted wealthy individuals and families looking to diversify their portfolios. Real estate development offered opportunities for capital appreciation and rental income, making it an appealing asset class amid fluctuating economic conditions. This pattern of investment contributed to the expansion of the construction market but also occasionally fueled speculative behavior, impacting price stability and affordability within the housing sector. The annual turnover of Iran’s construction sector was approximately $38.4 billion in 2005, reflecting a period of robust activity and investment. However, by 2011, this figure had decreased to about $32.8 billion, indicating a contraction in the sector’s economic output. The decline in turnover over this six-year period can be attributed to a combination of factors, including economic sanctions, inflationary pressures, and challenges in financing construction projects. Despite the downturn, the sector remained a substantial component of Iran’s economy, continuing to generate significant employment and investment opportunities. A persistent issue within Iran’s construction industry has been the poor quality of many buildings, which has necessitated widespread seismic reinforcement or renovation to meet safety standards. Given Iran’s location in a seismically active region, the structural integrity of buildings is of paramount importance to prevent catastrophic damage during earthquakes. However, inadequate construction practices, substandard materials, and insufficient regulatory enforcement have resulted in numerous structures that are vulnerable to seismic events. Efforts to retrofit and strengthen existing buildings have become a critical focus for authorities, aiming to enhance public safety and reduce the risk of disaster-related losses. In addition to urban construction, Iran maintains a substantial dam construction industry that plays a significant role in the country’s infrastructure development. The construction of dams supports multiple objectives, including water resource management, hydroelectric power generation, irrigation, and flood control. Iran’s investment in dam projects reflects the strategic importance of securing water supplies and expanding renewable energy capacity to support economic growth. The dam construction industry involves complex engineering and large-scale project management, contributing to technological advancement and employment within the construction sector. This segment of the industry complements urban and residential construction, underscoring the diverse and multifaceted nature of Iran’s construction economy.

Mobarakeh Steel Company, situated in Isfahan, stands as Iran’s largest steel mill and plays a pivotal role in the country’s industrial landscape. Established as a publicly traded entity on the Tehran Stock Exchange, Mobarakeh has contributed significantly to Iran’s steel production capacity and economic development. The company’s prominence reflects the broader importance of the steel industry within Iran’s mining and metals sector, which has experienced notable growth over recent decades. In 2011, mineral production accounted for approximately 0.6% of Iran’s gross domestic product (GDP), a figure that rose substantially to about 4% when including mining-related industries. This increase underscores the interconnectedness of mining activities with downstream sectors such as metallurgy, manufacturing, and construction materials. Despite this contribution, the mining sector has faced several critical challenges that have hindered its full potential. Key factors limiting sector growth include inadequate infrastructure, which affects transportation and processing capabilities; legal barriers that complicate investment and operational frameworks; difficulties in mineral exploration due to geological and technical constraints; and stringent government control over all mineral resources, which restricts private sector participation and innovation. Iran’s geological endowment places it among the world’s top 15 mineral-rich countries, a status supported by its vast and diverse mineral reserves. While the petroleum industry remains the dominant source of national revenue, accounting for the majority of Iran’s income, the mining sector employs a substantial workforce, with approximately 75% of all mining sector employees engaged in the extraction of minerals other than oil and natural gas. This highlights the sector’s role as a significant source of employment and economic activity beyond hydrocarbons. The range of non-oil mineral resources extracted in Iran is extensive and includes coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, strontium, silica, uranium, and gold. Among these, gold production is primarily a by-product of operations at the Sar Cheshmeh copper complex, emphasizing the integrated nature of mineral extraction processes. The Sar Cheshmeh mine, located in Kerman Province, is notable for hosting the world’s second-largest copper reserve, making it a strategic asset for both domestic consumption and export. Iron ore deposits are abundant in central Iran, with significant concentrations near the cities of Bafq, Yazd, and Kerman. These deposits have supported the development of the steel industry and related manufacturing sectors. The government’s ownership extends to approximately 90% of all mines and associated industries, reflecting a centralized approach to resource management. Nevertheless, Iran has actively sought foreign investment to modernize and expand its mining capabilities, recognizing the need for capital, technology, and expertise to overcome existing limitations. The mining sector contributes about 3% of Iran’s total exports, indicating its role as a modest but vital component of the country’s trade portfolio. In terms of specific mineral production rankings, Iran achieved notable positions globally in recent years. In 2019, it was the world’s second-largest producer of gypsum, a mineral widely used in construction and industrial applications. The country also ranked eighth worldwide in molybdenum production, a metal critical for steel alloying, and was the eighth largest producer of antimony, used in flame retardants and other chemical applications. Additionally, Iran held the eleventh position in iron ore production and was the eighteenth largest producer of sulfur in 2019. Its salt production placed it twenty-first globally, further demonstrating the diversity of its mineral output. Uranium production in Iran was significant as well; in 2018, the country ranked thirteenth worldwide, reflecting its capacity to produce this strategic mineral used primarily for nuclear fuel. Iran’s recoverable coal reserves were estimated at nearly 1.9 billion short tonnes, underscoring the country’s potential to develop this energy resource further. However, by mid-2008, Iran produced approximately 1.3 million short tonnes of coal annually while consuming about 1.5 million short tonnes, resulting in a net import status for coal. To address this imbalance, plans were set to increase hard-coal production to 5 million tons by 2012, a substantial rise from the 2 million tons produced as of November 2008. The steel industry is concentrated mainly in two regions: Isfahan and Khuzestan. These areas host the primary steel mills that have driven Iran toward steel self-sufficiency, a milestone achieved in 2009. This accomplishment reduced reliance on steel imports and supported domestic industrial growth. Alongside steel, production of other metals such as aluminum and copper was projected to reach significant levels by March 2009, with aluminum output expected to reach 245,000 tons and copper production projected at 383,000 tons. These figures indicate the expansion and diversification of Iran’s metals industry during that period. Cement production also played a crucial role within the mining and metals sector, with output reaching 65 million tons in 2009. Cement from Iran was exported to approximately 40 countries, highlighting the sector’s contribution to both domestic construction and international trade. The combination of mineral resource exploitation, metal production, and construction material manufacturing underscores the multifaceted nature of Iran’s mining and metals economy and its importance to the broader industrial framework.

Iran’s manufacturing sector has demonstrated a remarkable capacity for domestic production, supplying approximately 60 to 70 percent of the equipment required for its energy infrastructure. This self-reliance extends across a broad spectrum of critical assets, including refineries, oil tankers, drilling rigs, offshore platforms, and exploration instruments. The ability to produce such complex and capital-intensive machinery domestically has been a strategic priority for Iran, enabling the country to reduce dependence on foreign suppliers amid international sanctions and geopolitical pressures. This industrial base has supported the development and expansion of Iran’s oil and gas sectors, contributing to the country’s broader economic resilience. The petrochemical industry in Iran experienced significant growth during the early 21st century, with exports reaching $5.5 billion in 2007. This expansion was largely driven by several key projects, including the establishment of a fertilizer plant in Shiraz, which enhanced the country’s agricultural inputs sector. Additionally, the inauguration of the world’s largest ethylene production unit in Asalouyeh marked a milestone in Iran’s petrochemical capabilities, positioning the country as a major player in global petrochemical markets. The development of various special economic zones further facilitated investment and production efficiencies, creating favorable conditions for export growth and technological advancement within the sector. By 2008, Iran’s petrochemical exports had surged to $9 billion, reflecting a robust expansion fueled by increased production capacity and improved market access. This rapid growth underscored the strategic importance of petrochemicals as a revenue source beyond crude oil exports, diversifying Iran’s energy export portfolio. The government’s focus on expanding petrochemical infrastructure and enhancing downstream processing capabilities contributed to this upward trajectory. These developments also aligned with broader economic plans aimed at maximizing value-added production and reducing vulnerability to fluctuations in crude oil prices. During the first ten months of the Iranian calendar year 2010, petrochemical exports amounted to approximately $7.6 billion, indicating sustained demand and continued sectoral momentum despite international sanctions and economic challenges. This period saw ongoing investments in refining and petrochemical complexes, which helped maintain export volumes and support domestic industrial growth. The export figures from this timeframe reflected the resilience of Iran’s petrochemical sector and its capacity to adapt to external pressures while maintaining production and market presence. The National Petrochemical Company (NPC), a key state-owned enterprise, projected a significant increase in output capacity, aiming to surpass 100 million tonnes per annum (tpa) by 2015. This target represented a doubling of capacity from the estimated 50 million tpa in 2010, highlighting ambitious plans to scale production and enhance Iran’s position in the global petrochemical industry. The expansion involved the commissioning of new plants, modernization of existing facilities, and integration of advanced technologies to improve efficiency and product quality. Achieving this capacity was expected to solidify Iran’s role as a major chemical producer and exporter. By 2015, Iran was anticipated to become the world’s second-largest chemical producer, trailing only behind Dow Chemical, a leading multinational corporation. This projection was based on the country’s extensive investments in large-scale chemical complexes, many of which ranked among the largest globally. These complexes encompassed a wide range of products, including polymers, fertilizers, and specialty chemicals, catering to both domestic needs and international markets. The growth of Iran’s chemical industry was seen as a critical component of the country’s industrial diversification strategy, reducing reliance on crude oil exports and fostering sustainable economic development. One notable example of Iran’s industrial capabilities is the Yadavaran gas refinery, which features a giant gas reactor designed and manufactured by AzarAb Industries Corporation. This achievement exemplifies the country’s advanced engineering and manufacturing skills, as AzarAb Industries is recognized for producing complex equipment for the oil and gas sector. The Yadavaran refinery plays a vital role in processing natural gas resources, contributing to Iran’s energy self-sufficiency and petrochemical feedstock supply. The indigenous design and production of such critical components underscore Iran’s commitment to technological self-reliance amid external constraints. Despite these advancements, several major refineries in Iran, including those located at Abadan, Kermanshah, and Tehran, struggled to meet domestic gasoline demand in 2009. The Abadan refinery holds historical significance as the site of Iran’s first refinery, yet by 2009, capacity limitations and aging infrastructure hindered its ability to satisfy the growing consumption needs of the population. Similar challenges were faced by the Kermanshah and Tehran refineries, where production shortfalls necessitated gasoline imports to bridge the supply gap. These deficiencies highlighted the urgent need for investment and modernization within the refining sector to achieve energy self-sufficiency. To address these challenges, Iran’s refining industry required an estimated investment of $15 billion during the period from 2007 to 2012. This capital infusion aimed to expand refining capacity, upgrade existing facilities, and implement new technologies to improve efficiency and product quality. The overarching goal was to eliminate reliance on gasoline imports and achieve full self-sufficiency in fuel production. Such investments were critical not only for economic reasons but also for national security, as dependence on imported gasoline exposed the country to vulnerabilities amid fluctuating international relations and sanctions. Iran’s gasoline prices have historically been among the lowest globally, ranking as the fifth cheapest in the world. This pricing policy, driven by government subsidies, has had significant economic and social implications. While affordable fuel supports domestic consumption and transportation affordability, it has also incentivized widespread fuel smuggling into neighboring countries where prices are higher. The illicit trade in gasoline has resulted in revenue losses for the Iranian government and complicated efforts to manage domestic fuel consumption and distribution effectively. In November 2019, the Iranian government implemented a substantial increase in gasoline prices, raising them by 50 percent, and reintroduced strict rationing policies reminiscent of those adopted in 2007. This policy shift was part of a broader subsidy reform plan aimed at reducing government expenditure on fuel subsidies and curbing excessive consumption. The rationing system limited private vehicles to a monthly quota of 60 liters at the subsidized price, with any additional purchases subject to a higher price. This dual pricing mechanism was designed to encourage more efficient fuel use and reduce smuggling incentives. Under the 2019 rationing framework, gasoline prices rose to 15,000 rials per liter for the initial quota, while purchases exceeding the 60-liter monthly limit were charged at 30,000 rials per liter. Despite this significant increase, the new prices remained below the target levels outlined in Iran’s subsidy reform plan, reflecting a cautious approach to balancing fiscal objectives with public acceptance. The rationing system was enforced through smart card technology, enabling the government to monitor and control fuel distribution more effectively. The policy changes enacted in 2019 were largely driven by the impact of intensified US sanctions, which severely constrained Iran’s oil revenues and foreign exchange earnings. The government sought to mitigate these economic pressures by reducing subsidy burdens and promoting more sustainable fuel consumption patterns. However, the abrupt price hikes and rationing measures triggered widespread nationwide protests, reflecting public dissatisfaction with the economic hardships and perceived government mismanagement. The unrest underscored the sensitive nature of fuel pricing policies in Iran’s socio-political context. One year following the implementation of the 2019 gasoline rationing and price increase, several outcomes were observed. Notably, there was a measurable reduction in pollution levels and domestic wasteful consumption of fuel, indicating that the policy had some success in promoting more efficient energy use. Additionally, the reforms contributed to an increase in exports of petroleum products, as domestic demand was curtailed and production capacity was redirected toward external markets. These developments suggested that despite initial social resistance, the policy adjustments had begun to yield economic and environmental benefits aligned with the government’s strategic objectives.

Despite various initiatives aimed at economic liberalization during the 1990s, Iran’s government spending remained notably high throughout the period, reflecting the state’s continued influential role in the economy. This substantial public expenditure was not limited to direct government outlays but also included significant spending by quasi-governmental foundations, which operated with considerable autonomy yet maintained close ties to the state apparatus. These foundations, often referred to as “bonyads,” controlled a large portion of economic resources and were involved in diverse sectors, thereby contributing to the overall scale of government-related spending. The persistence of high government expenditure, even amid liberalization efforts, underscored the complexity of Iran’s economic structure, where state influence extended deeply into various facets of economic activity. Estimates consistently indicated that the service sector’s spending in Iran surpassed two-fifths of the country’s Gross Domestic Product (GDP), highlighting the sector’s substantial role in the national economy. More precisely, service sector expenditures regularly exceeded 40% of GDP, reflecting the sector’s broad scope and importance. This considerable share of GDP devoted to services illustrated a structural shift in Iran’s economy, moving away from a predominantly agriculture- and oil-based economy toward one increasingly reliant on services. The expansion of the service sector was driven by multiple factors, including demographic changes, urbanization, and government policies that emphasized the development of public and social services. A significant proportion of the expenditures within the service sector was directly linked to government activities. This included substantial military spending, which remained a priority for the Iranian government due to regional security considerations and defense modernization efforts. In addition to defense, government salaries constituted a major component of service sector spending, reflecting the large public sector workforce employed across various ministries and state institutions. Social security payments also formed a critical part of government-related service expenditures, as the state sought to provide social safety nets and welfare benefits to its population. Together, these government-related expenses underscored the public sector’s dominant role in shaping the service economy and influencing overall economic dynamics. Urbanization emerged as a key driver behind the growth of the service sector in Iran, as increasing numbers of people migrated from rural areas to cities in search of better economic opportunities and improved living standards. This demographic shift led to expanded demand for a wide range of services, including education, healthcare, retail, and professional services, thereby stimulating growth within the sector. The concentration of population in urban centers also facilitated the development of infrastructure and commercial activities, further reinforcing the service sector’s expansion. Urbanization not only altered consumption patterns but also transformed labor markets, with more workers engaged in service-oriented occupations compared to traditional agricultural roles. Within the service sector, several major industries played pivotal roles in Iran’s economic landscape. Public services, particularly education, represented a significant component, as the government invested in expanding access to schooling and higher education to meet the needs of a growing and youthful population. Commerce constituted another vital industry, encompassing wholesale and retail trade activities that catered to the demands of both urban and rural consumers. Personal services, including healthcare, hospitality, and domestic services, also contributed substantially to the sector’s output. Professional services, such as legal, financial, and consulting activities, experienced growth in response to the evolving complexity of the economy and increasing demand for specialized expertise. Tourism, although constrained by political and economic factors, remained an important segment, leveraging Iran’s rich cultural heritage and historical sites to attract both domestic and international visitors. The transport and communications sector, a critical subset of the service industry, demonstrated notable growth and economic significance. By the year 2013, the total value of this sector was projected to reach approximately $46 billion in nominal terms, reflecting both infrastructure development and increased demand for transportation and communication services. This valuation underscored the sector’s expanding role in facilitating economic activities across Iran, including the movement of goods and people as well as the dissemination of information. The growth of telecommunications, in particular, mirrored global technological trends and contributed to enhanced connectivity within the country. In 2013, the transport and communications sector was expected to account for about 6.8% of Iran’s GDP, indicating its substantial contribution to the overall economy. This percentage highlighted the sector’s importance not only as a facilitator of other economic activities but also as a significant source of economic output in its own right. The share of GDP attributed to transport and communications reflected ongoing investments in infrastructure such as roads, railways, airports, and telecommunication networks, which were essential for supporting Iran’s broader economic development goals. Employment data from 1996, compiled by the International Labour Organization, provided insights into the labor force distribution within the transport and communications sector. By 2008, this sector employed approximately 3.4 million people, demonstrating its role as a major employer in the Iranian economy. The sizeable workforce engaged in transport and communications activities underscored the labor-intensive nature of these industries and their capacity to absorb a significant portion of the labor force. This level of employment represented roughly 20.5% of Iran’s total labor force in 2008, emphasizing the sector’s critical role in providing jobs and supporting livelihoods. The substantial share of employment within transport and communications also reflected broader structural changes in the economy, with increasing numbers of workers transitioning from agriculture and manufacturing to service-oriented occupations. The prominence of this sector in employment terms highlighted its importance not only for economic output but also for social stability and economic inclusion.

In 2014, Iran’s electricity sector demonstrated a significant capacity for both production and distribution, generating a total of 258 billion kilowatt-hours (kWh) of electricity. Of this production, domestic consumption accounted for 218 billion kWh, indicating a robust internal demand for electrical energy across residential, commercial, and industrial sectors. The country also engaged in cross-border electricity trade, exporting approximately 9.7 billion kWh to neighboring countries, while importing 3.8 billion kWh to supplement domestic supply during peak demand periods or shortages. These figures underscore Iran’s position as a net exporter of electricity, reflecting its relatively advanced generation infrastructure and strategic energy management. To address the rising domestic energy demand and diversify its electricity generation portfolio, Iran set an ambitious target to generate 23,000 megawatts (MW) of electricity through nuclear technology by the year 2025. This plan was conceived as part of a broader strategy to reduce reliance on fossil fuels and enhance energy security by incorporating nuclear power into the national grid. However, the evolving geopolitical landscape, technological challenges, and international negotiations have necessitated periodic revisions and updates to this nuclear energy roadmap. The goal reflects Iran’s commitment to expanding its nuclear capabilities within the framework of peaceful energy development, despite facing external pressures and sanctions that have impacted the pace and scale of nuclear infrastructure projects. In terms of energy mix, data from 2012 reveal that Iran’s electricity generation was predominantly reliant on fossil fuels, which accounted for 85.6% of total output. Hydroelectric power contributed a significant 12.4%, leveraging the country’s river systems and topographical features to produce renewable energy. Nuclear power, though still in its nascent stages at the time, represented 1.2% of electricity generation, a figure expected to grow with the completion of new nuclear facilities. Other sources, including renewables such as wind and solar, constituted a minor 0.8%, indicating the early phase of diversification into alternative energy sources beyond hydro and nuclear. This energy composition reflects Iran’s heavy dependence on hydrocarbons while gradually integrating other forms of power generation. Iran’s oil production in 2015 stood at approximately 3.3 million barrels per day (bpd), equivalent to 520,000 cubic meters per day. This level of output positioned Iran as a significant player in the global petroleum market, although production levels have fluctuated over time due to political, economic, and technical factors. In 2013, Iran’s oil exports were recorded at 1,042,000 bpd (165,700 m³/d), reflecting its role as a major oil supplier to international markets despite facing sanctions and export restrictions. Conversely, Iran imported 87,440 bpd (13,902 m³/d) of oil, primarily to meet specific refinery feedstock requirements or to supplement domestic shortages of certain petroleum products. These import-export dynamics illustrate the complexity of Iran’s oil trade, balancing between domestic consumption needs and foreign market demands. As of 2016, Iran’s proven oil reserves were estimated at 157.8 billion barrels (25.09×10⁹ cubic meters), ranking the country among the world’s top holders of crude oil resources. These vast reserves are concentrated primarily in the southwestern region near the Persian Gulf, as well as in northern Iran and the central Zagros mountain range. The substantial size of these reserves underpins Iran’s long-term potential as a major oil producer and exporter, although the effective exploitation of these resources depends on technological capabilities, investment levels, and geopolitical conditions. Natural gas production in Iran reached 174.5 cubic kilometers (km³) in 2014, with domestic consumption closely matching production at 170.2 km³. The country also exported 9.86 km³ of natural gas, primarily to neighboring countries, while importing 6.886 km³ to satisfy regional demand fluctuations or specific industrial requirements. This near balance between production and consumption highlights the critical role of natural gas in Iran’s energy system, both as a fuel for power generation and as a feedstock for petrochemical industries. The export-import figures also reflect Iran’s integration into regional energy markets and its strategic use of natural gas resources. By 2016, Iran’s proven natural gas reserves were estimated at 34,020 km³, making it one of the world’s leading holders of natural gas resources. According to The World Factbook in 2014, Iran possessed the world’s second-largest proven natural gas reserves, trailing only Russia. This vast endowment positions Iran as a key player in the global natural gas market, with the potential to influence regional energy dynamics and supply security. Iran’s natural gas reserves constitute approximately 15% of the world’s total proven gas reserves, underscoring the strategic importance of this resource for the country’s economy and energy policy. Iran holds approximately 10% of the world’s proven oil reserves and 15% of its proven natural gas reserves, positioning it as a critical energy supplier on the global stage. These substantial reserves provide the foundation for Iran’s energy sector, supporting domestic consumption, export revenues, and industrial development. The country’s energy infrastructure includes a combination of oil, natural gas, and hydroelectric power facilities, which together form the backbone of its electricity generation and fuel supply systems. The integration of these domestic energy sources enables Iran to maintain a degree of energy self-sufficiency while pursuing export opportunities. Despite its abundant energy resources, Iran experiences significant energy wastage, estimated at six to seven billion dollars annually. This level of wastage is considerably higher than international norms and reflects inefficiencies in energy consumption, transmission, and distribution. Factors contributing to this wastage include outdated infrastructure, insufficient energy conservation measures, and subsidized energy prices that reduce incentives for efficient use. Addressing these inefficiencies remains a critical challenge for Iran’s energy policy, as reducing wastage could free up resources for investment and enhance overall energy security. In terms of resource recycling, Iran recycles approximately 28% of its used oil and gas, a figure that lags behind some other countries where recycling rates can reach up to 60%. This disparity highlights opportunities for improving the management and reuse of hydrocarbon products within Iran’s energy sector. Enhanced recycling practices could reduce environmental impacts, lower production costs, and increase the sustainability of Iran’s oil and gas industries. The relatively low recycling rate underscores the need for technological upgrades and regulatory reforms to promote more efficient resource utilization. In 2008, Iran allocated a substantial $84 billion in subsidies for oil, gas, and electricity, reflecting the government’s commitment to maintaining affordable energy prices for consumers and industries. These subsidies aimed to support economic growth, social welfare, and political stability by cushioning the population from volatile global energy prices. However, such extensive subsidies also imposed a significant fiscal burden on the government and contributed to inefficient energy consumption patterns. Over time, Iran has undertaken subsidy reform initiatives to reduce these costs and encourage more rational energy use. Iran ranks as the world’s third-largest consumer of natural gas, following the United States and Russia. This high consumption level is driven by the country’s large population, industrial base, and the widespread use of natural gas for power generation, heating, and petrochemical production. The extensive utilization of natural gas reflects its availability and cost-effectiveness relative to other fuels, as well as Iran’s strategic emphasis on developing this resource to meet growing energy demand. The first nuclear power plant in Iran, located at Bushehr, was completed in 2010 with significant assistance from Russia. This facility marked a milestone in Iran’s nuclear energy program, providing a new source of electricity generation that complements its fossil fuel-based infrastructure. The Bushehr plant was designed to enhance energy diversification and reduce environmental impacts associated with conventional power plants. Its completion followed decades of planning and construction delays, influenced by geopolitical tensions and technical challenges. Iran has been a major oil exporter since 1913, with its oil industry historically centered around major oil fields located in the central and southwestern parts of the western Zagros mountains, as well as in northern Iran and the Persian Gulf region. These fields have formed the core of Iran’s petroleum production for over a century, contributing significantly to the country’s economic development and geopolitical importance. The discovery and exploitation of these fields attracted foreign investment and expertise, shaping Iran’s position in the global energy market. In 1978, prior to the Iranian Revolution, Iran was the fourth-largest oil producer worldwide, the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC), and the second-largest oil exporter. This dominant position reflected the country’s vast reserves, extensive production infrastructure, and strategic location near major shipping routes. Iran’s oil sector was a critical component of its national economy, generating substantial government revenues and foreign exchange earnings. Following the 1979 revolution, the new government implemented policies that led to a reduction in oil production, reflecting shifts in political priorities and disruptions in the oil industry. The subsequent Iran-Iraq war further exacerbated declines in production due to damage inflicted on oil infrastructure and security challenges. These factors combined to constrain Iran’s oil output and export capacity during the 1980s, impacting its economic performance and international energy market presence. Oil production began to recover in the late 1980s as pipeline repairs were completed and new oil fields in the Persian Gulf were brought into production. By 2004, Iran’s annual oil production reached approximately 1.4 billion barrels, generating a net profit of $50 billion. This recovery was driven by concerted efforts to rehabilitate damaged infrastructure, attract investment, and increase production efficiency. The resurgence of oil output reinforced Iran’s role as a significant oil supplier and revenue generator. Data from the Iranian Central Bank indicate a declining trend in the share of oil-product exports within the country’s total exports over several fiscal years. Specifically, oil-product exports accounted for 84.9% of total exports in the fiscal year 2006, slightly increasing to 86.5% in 2007/2008, then decreasing to 85.5% in 2008/2009, followed by a more pronounced decline to 79.8% in 2009/2010, and further down to 78.9% in the first three quarters of fiscal year 2010. This trend suggests a gradual diversification of Iran’s export portfolio, possibly reflecting efforts to develop non-oil sectors and mitigate dependence on hydrocarbon revenues. Iranian officials have estimated that annual revenues from oil and gas could reach $250 billion by 2015, contingent upon the successful implementation of ongoing projects and expansion plans. This projection underscores the centrality of the hydrocarbon sector to Iran’s fiscal health and economic development strategies. Achieving such revenue targets would require increased production capacity, enhanced export infrastructure, and favorable market conditions. The transportation of oil within Iran relies heavily on an extensive network of pipelines that deliver crude oil to domestic refineries and export terminals. Key export ports include Abadan, Bandar-e Mashur, and Kharg Island, which serve as critical hubs for shipping Iranian oil to international markets. These facilities are strategically located to facilitate access to global shipping lanes and ensure efficient movement of petroleum products. Since 1997, Iran’s state-owned oil and gas industry has engaged in major exploration and production agreements with foreign consortia. These partnerships aim to attract foreign investment, technology, and expertise to develop Iran’s hydrocarbon resources more effectively. The involvement of international companies has been subject to geopolitical constraints, including sanctions, but remains a vital component of Iran’s strategy to modernize and expand its energy sector. In 2008, Iran inaugurated the Iranian Oil Bourse (IOB) on Kish Island, establishing a new platform for trading petroleum, petrochemicals, and natural gas. The IOB primarily conducts transactions in euros and Iranian rials, deliberately excluding the US dollar to circumvent international financial restrictions and reduce dependence on the American currency. This initiative reflects Iran’s efforts to assert greater control over its energy exports and foster alternative financial mechanisms amid geopolitical challenges. The Petroleum Ministry of Iran has outlined plans to invest approximately $500 billion in the country’s oil sector by 2025. This substantial investment aims to enhance exploration, production, refining, and export capabilities, ensuring the long-term sustainability and competitiveness of Iran’s hydrocarbon industry. The planned expenditures encompass upgrading infrastructure, adopting advanced technologies, and expanding capacity to meet both domestic demand and international market opportunities.

Iran’s retail industry has traditionally been characterized by a dual structure comprising cooperatives—many of which receive government sponsorship—and independent retailers primarily operating within the country’s historic bazaars. These cooperatives often function as state-supported entities designed to regulate prices and ensure the availability of essential goods, reflecting the government’s active role in the retail sector. Simultaneously, independent retailers maintain a significant presence, particularly in the traditional marketplaces that have long served as central hubs for commerce and social interaction throughout Iranian cities. This coexistence of government-backed cooperatives and private merchants has shaped a distinctive retail environment that blends modern regulatory frameworks with longstanding cultural and economic practices. The predominance of street markets in Iran’s food retail sector underscores the importance of informal and semi-formal trading venues in the distribution of consumables. These markets serve as the primary point of sale for the majority of food products, catering to a broad demographic that relies on them for affordable and accessible goods. Prices within these street markets are not left to fluctuate entirely by supply and demand; instead, they are regulated by the Chief Statistics Bureau, which plays a pivotal role in setting price controls to stabilize the market and curb inflationary pressures. This governmental oversight aims to protect consumers from excessive price volatility and to maintain a degree of affordability in essential food items, reflecting broader economic policies focused on food security and social welfare. Iran hosts an extensive network of small grocery retailers, totaling 438,478 outlets across the country. These small-scale retailers are especially prevalent outside of Tehran, where the retail infrastructure remains less developed in terms of modern retail formats. In many provincial cities and rural areas, these grocery stores serve as vital access points for daily necessities, often embedded within local neighborhoods and communities. The limited presence of hypermarkets and supermarkets outside the capital city highlights the uneven distribution of modern retail formats, with Tehran serving as the primary locus for larger, more organized retail establishments. This disparity reflects both infrastructural challenges and consumer preferences that favor smaller, locally oriented retail operations in much of the country. Despite the dominance of traditional retail formats, Iran’s retail landscape has been gradually evolving, marked by a steady increase in the number of mini-markets and supermarkets. These newer retail outlets, while still relatively modest in scale compared to global standards, represent a shift toward more organized and modern retail practices. Most of these mini-markets and supermarkets operate independently rather than as part of large chains, indicating a fragmented but growing sector that caters to changing consumer demands for convenience and variety. This trend reflects broader socio-economic changes, including urbanization, rising incomes, and shifts in consumption patterns that encourage the development of retail formats offering a wider selection of goods under one roof. Among the largest retail chains in Iran, several state-owned entities stand out for their extensive reach and market influence. Etka, Refah, Shahrvand, and Hyperstar Market constitute the most prominent chain stores, each playing a significant role in shaping the retail sector. Etka, for instance, is known for its widespread network of stores that provide a range of food and household products, while Refah and Shahrvand operate large supermarket chains that cater to urban consumers seeking modern shopping experiences. Hyperstar Market, a joint venture with foreign investment, introduced hypermarket-style retailing to Iran, offering a broad assortment of goods in a single location. The presence of these state-owned chains underscores the government’s continued involvement in retail, both as a means of market regulation and as a strategy to modernize the sector. The growth of electronic commerce in Iran has been a notable development in the retail sector, with online retail activities surpassing the $1 billion mark as early as 2009. This milestone indicated a significant shift toward digital platforms for purchasing goods and services, driven by increasing internet penetration, mobile device usage, and consumer familiarity with online shopping. The expansion of e-commerce has introduced new dynamics into the retail market, offering consumers greater convenience and access to a wider range of products, while also challenging traditional retail models. Despite infrastructural and regulatory challenges, the early achievement of this financial threshold demonstrated the potential for robust growth in Iran’s digital retail economy. In 2012, Iranian consumers allocated approximately $77 billion toward food products, reflecting the substantial share of household expenditure devoted to essential consumables. This figure highlights the centrality of food in the domestic consumption basket and underscores the importance of the retail sector in meeting the nutritional needs of the population. The significant volume of spending on food also points to the scale of the market and the critical role of retail distribution channels in ensuring the availability and affordability of food items across diverse regions of the country. During the same year, expenditures on clothing reached about $22 billion, indicating a considerable demand for apparel and textiles among Iranian consumers. This level of spending reflects both domestic production and imports, as well as evolving fashion trends and consumer preferences. The clothing sector represents a key component of the retail market, catering to a population with a growing interest in personal appearance and lifestyle goods, alongside traditional attire. The substantial financial outlay on clothing also signals the potential for growth in related retail formats, including specialty stores and shopping centers. Outward tourism expenditures in 2012 amounted to approximately $18.5 billion, a figure that provides insight into the spending behavior of Iranians traveling abroad. This considerable outflow of funds for international travel and tourism-related expenses reflects the aspirations of many Iranians to engage with global destinations, despite domestic economic constraints and geopolitical challenges. The magnitude of these expenditures has implications for the domestic retail sector, as it represents a significant portion of disposable income directed outside the country, potentially affecting local consumption patterns and economic activity. By 2015, total consumer spending in Iran was projected to reach $176.4 billion, illustrating the overall scale of domestic consumption and its importance as a driver of economic activity. This projection encompasses a wide range of goods and services, reflecting the diverse needs and preferences of Iranian households. The growth in consumer spending over the years signals an expanding middle class and increased purchasing power, which in turn stimulates demand within the retail sector and encourages investment in retail infrastructure and services. Disposable income in Iran was estimated at $287 billion in 2015, representing the total amount available for personal expenditure after accounting for taxes and other mandatory deductions. This figure provides a broad measure of the financial resources at the disposal of Iranian consumers, underpinning their capacity to engage in retail purchasing and other forms of consumption. The relationship between disposable income and consumer spending is a critical factor in assessing the health and potential of the retail market, as higher disposable income typically correlates with increased demand for a variety of goods and services. The sizeable disposable income in 2015 thus pointed to significant opportunities for growth and diversification within Iran’s retail and distribution sectors.

Between 2005 and 2010, Iran experienced a steady improvement in the health status of its population, as reflected in the gradual increase in life expectancy. Data compiled by the Economist Intelligence Unit (EIU) indicated that life expectancy at birth rose from 70.0 years in 2005 to 71.4 years in 2010. This upward trend was consistent year over year, with incremental gains recorded annually: 70.3 years in 2006, 70.6 in 2007, 70.9 in 2008, 71.1 in 2009, culminating in 71.4 years in 2010. These figures suggest ongoing enhancements in healthcare delivery, public health initiatives, and overall living conditions during this period. Despite these improvements in life expectancy, healthcare spending as a proportion of Iran’s Gross Domestic Product (GDP) remained stable at 4.2% throughout the five-year span from 2005 to 2010. This constancy indicates that while the relative share of national economic resources allocated to healthcare did not increase, the absolute level of investment in health services did grow. This is evidenced by the rise in per capita healthcare expenditure, which more than doubled from $113 in 2005 to $261 in 2010. The increase in per capita spending reflects both inflationary pressures and a genuine expansion in the availability and utilization of medical services and technologies accessible to the Iranian population. The constitutional framework of Iran enshrines the right of its citizens to access basic healthcare services, underscoring the government’s commitment to public health. This constitutional guarantee has been operationalized through various health policies and programs designed to provide comprehensive healthcare coverage across the country. By 2008, approximately 73% of Iranians were enrolled in the voluntary national health insurance system, which played a pivotal role in extending health coverage to a broad segment of the population. This widespread enrollment facilitated greater financial protection against health-related expenses and improved access to medical care. Insurance coverage in Iran extends significantly into pharmaceutical financing, with over 85% of the population relying on insurance mechanisms to cover the costs of medications. This high rate of insurance utilization for pharmaceuticals highlights the critical role that insurance schemes play in mitigating out-of-pocket expenditures and ensuring the affordability of essential medicines. The government’s involvement in the pharmaceutical sector includes substantial subsidies for both the production and importation of pharmaceuticals. These subsidies are instrumental in maintaining the financial viability of domestic pharmaceutical manufacturers and in stabilizing the supply of imported medicines, thereby supporting the overall health system. The health and medical sector in Iran has demonstrated remarkable growth over the early 21st century. In 2002, the total market value of this sector was estimated at $24 billion. Projections made at that time anticipated an increase to $50 billion by 2013, signaling robust expansion driven by rising demand for healthcare services, increased government investment, and the development of domestic health infrastructure. Within this broader sector, the pharmaceutical industry has been a particularly dynamic component. By 2006, Iran’s pharmaceutical industry consisted of 55 companies that collectively produced 96% of the medicines available in the domestic market. This high degree of local production underscored the country’s emphasis on self-sufficiency in pharmaceuticals and reduced reliance on imports. The pharmaceutical market was valued at approximately $1.2 billion in 2006, reflecting the scale of domestic production and consumption. Forecasts at that time projected rapid growth, with the market expected to reach $3.65 billion by 2013. This anticipated expansion was driven by factors such as population growth, increased insurance coverage, government subsidies, and ongoing investments in pharmaceutical research and manufacturing capabilities. The growth trajectory of the pharmaceutical sector exemplifies Iran’s broader efforts to enhance healthcare accessibility and quality through the development of a robust domestic pharmaceutical industry, supported by policy measures aimed at ensuring affordability and availability of essential medicines.

Cyrus the Great, the founder of the Achaemenid Empire, is commemorated by his tomb located in Pasargadae, an ancient city in Iran that holds immense historical and archaeological significance. Pasargadae, situated in the Fars Province, served as the capital of the Achaemenid Empire during the 6th century BCE and is renowned for its monumental ruins, including palaces, gardens, and the tomb itself. The site exemplifies early Persian architectural and urban planning achievements, and it has been extensively studied for its contributions to understanding the development of imperial centers in antiquity. The tomb of Cyrus remains a symbol of Iran’s rich cultural heritage and continues to attract scholars and tourists alike, serving as a tangible link to the country’s ancient past. Iran’s cultural wealth is further reflected in its possession of 19 historic sites that have been inscribed on the UNESCO World Heritage List. These sites encompass a wide range of historical periods and cultural expressions, from ancient archaeological remains to Islamic architecture and Persian gardens. Notable among these are Persepolis, the ceremonial capital of the Achaemenid Empire; the ancient city of Bam with its massive mud-brick citadel; the Masjed-e Jameh of Isfahan, a masterpiece of Islamic architecture; and the Golestan Palace in Tehran, which showcases Qajar-era artistry. The inclusion of these sites on the UNESCO list underscores Iran’s status as a cradle of civilization and a repository of diverse cultural traditions that have influenced the broader region for millennia. The trajectory of tourism in Iran has been markedly influenced by the country’s modern history, particularly the Iran-Iraq war from 1980 to 1988. This prolonged conflict severely disrupted the nation’s stability and infrastructure, leading to a significant decline in international tourist arrivals. The war years were characterized by widespread insecurity and economic hardship, which deterred foreign visitors and constrained domestic tourism development. However, following the cessation of hostilities, Iran embarked on a gradual recovery process, rebuilding its tourism infrastructure and promoting its cultural and natural attractions to the global community. This post-war revival laid the foundation for renewed growth in the tourism sector during the subsequent decades. By 2004, the number of foreign tourists visiting Iran had reached approximately 1,659,000, reflecting a steady resurgence in international interest. This upward trend continued, with tourist arrivals increasing to about 2.3 million in 2009, signaling a growing recognition of Iran’s appeal as a travel destination. The increase in visitor numbers was supported by efforts to improve tourism facilities, enhance promotional activities, and facilitate access to key sites. Despite challenges related to geopolitical tensions and travel restrictions, Iran managed to attract a diverse array of tourists, drawn by its historical landmarks, cultural heritage, and natural landscapes. The majority of foreign tourists visiting Iran originate from Asian countries, including the republics of Central Asia, such as Uzbekistan, Turkmenistan, and Tajikistan. These visitors often share cultural, linguistic, and historical ties with Iran, which contribute to their interest in exploring the country’s heritage. Additionally, the proximity and relatively easier travel arrangements from neighboring Asian nations have facilitated cross-border tourism flows. This regional tourism dynamic has played a crucial role in sustaining the industry, especially during periods when Western tourist numbers were comparatively lower. Approximately 10% of international tourists to Iran come from the European Union and North America, representing a smaller but significant segment of the inbound market. Visitors from countries such as Germany, France, the United Kingdom, and the United States are often motivated by a desire to experience Iran’s rich archaeological sites, Islamic architecture, and vibrant cultural traditions. Despite occasional political and diplomatic challenges, these tourists contribute to the diversity of Iran’s tourism profile and often participate in organized tours that highlight the country’s historical and artistic treasures. Among the most popular tourist destinations within Iran are the provinces and cities of Mazandaran, Isfahan, Mashhad, and Shiraz. Mazandaran, located along the southern coast of the Caspian Sea, is renowned for its lush forests, scenic coastline, and recreational opportunities, attracting both domestic and international visitors seeking natural beauty. Isfahan, often referred to as “Half of the World,” boasts an array of stunning Islamic architecture, including the Naqsh-e Jahan Square, mosques, and bridges, making it a cultural and artistic hub. Mashhad, home to the Imam Reza shrine, is a major pilgrimage site for Shia Muslims and one of the most visited cities in the country. Shiraz, celebrated for its poetic heritage and proximity to Persepolis, offers a blend of historical sites, gardens, and vibrant bazaars, appealing to tourists interested in Persian history and literature. In the early 2000s, Iran’s tourism industry confronted significant limitations that hindered its full potential. Challenges included inadequate infrastructure such as transportation networks, accommodations, and communication systems, which affected the overall tourist experience. Additionally, industry standards in hospitality and service quality were often inconsistent, and there was a shortage of adequately trained personnel capable of meeting international expectations. These factors collectively constrained the growth of tourism, prompting government and private sector initiatives aimed at addressing these deficiencies through investment, training programs, and policy reforms. Despite these challenges, several organized tours from European countries, notably Germany and France, visited Iran annually during this period. These tours were typically focused on exploring Iran’s archaeological sites and monuments, offering participants in-depth insights into the country’s ancient civilizations and cultural achievements. Tour operators in Europe recognized the unique appeal of Iran’s heritage sites and facilitated cultural exchanges that contributed to a better understanding of Iran’s historical significance. Such tours played a role in maintaining a steady flow of European tourists and fostering international cultural dialogue. In 2003, Iran ranked 68th worldwide in terms of tourism revenues, reflecting its emerging status in the global tourism market. While this ranking indicated room for growth compared to leading tourist destinations, it also highlighted the economic potential of the sector within the country’s broader economy. Tourism revenues contributed to foreign exchange earnings, job creation, and regional development, underscoring the importance of continued investment and strategic planning to enhance Iran’s competitiveness in the international tourism arena. According to UNESCO and the deputy head of research for the Iran Travel and Tourism Organization (ITTO), Iran is rated among the “10 most touristic countries in the world.” This designation reflects the country’s vast array of cultural, historical, and natural attractions that draw visitors from around the globe. The recognition by UNESCO, an authoritative body in cultural heritage preservation and promotion, affirms Iran’s significant role as a destination rich in tourism resources. The ITTO’s research further supports this status by highlighting the diversity and depth of Iran’s tourism offerings, which encompass ancient sites, religious landmarks, and unique landscapes. Domestic tourism in Iran represents one of the largest internal travel industries globally, indicating a robust and dynamic sector within the country. Iranian citizens frequently travel to various regions for leisure, pilgrimage, and cultural exploration, contributing substantially to the local economies and the sustainability of tourism infrastructure. The prevalence of domestic tourism reflects the population’s strong connection to their cultural heritage and natural environment, as well as the availability of accessible travel options within the country. This internal demand for tourism services has provided a stable foundation for the industry, complementing international visitor arrivals and supporting ongoing development efforts.

Government loans and credits in Iran have traditionally been channeled primarily through the country’s banking institutions to support industrial and agricultural projects. These financial resources were allocated with the aim of fostering economic development and self-sufficiency, particularly in sectors deemed vital for national growth. The Iranian banking system thus played a pivotal role in directing capital toward state-prioritized industries and agricultural enterprises, facilitating investments that aligned with broader economic planning objectives. Iran’s official currency, the rial, served as the fundamental unit of monetary exchange within the country. In 2007, the rial maintained an average exchange rate of approximately 9,326 rials to the U.S. dollar. However, this official rate often diverged significantly from the rates observed on the unofficial or black market, where the rial was exchanged at a higher value relative to the dollar. This discrepancy reflected underlying economic pressures, including inflation, currency controls, and market demand for foreign currency, which collectively contributed to the existence of a dual exchange rate system. The structure of Iran’s banking sector underwent a profound transformation following the 1979 Islamic Revolution. In that year, the new government nationalized all private banks, effectively bringing the entire banking industry under state control. This nationalization marked a decisive shift away from the previously mixed banking model toward a system rooted in Islamic financial principles. The reorganization aimed to align the banking sector with Islamic law, or Sharia, which prohibits the charging or paying of interest (riba). Consequently, by the mid-1980s, the Iranian banking system had replaced conventional interest on loans with handling fees, a mechanism designed to comply with Islamic jurisprudence. This system sought to maintain the functionality of credit and lending while avoiding the religiously proscribed practice of interest. The transition required extensive legal and operational adjustments within banks and financial institutions, fundamentally altering the nature of banking transactions and credit provision in Iran. The Tehran Stock Exchange (TSE) emerged as a significant component of Iran’s financial landscape during the late 20th and early 21st centuries. Between 1999 and 2011, the TSE was recognized as one of the world’s best performing stock exchanges, reflecting robust growth in market capitalization and investor participation. This period of expansion underscored the increasing importance of capital markets in Iran’s economy, providing a platform for corporate financing and investment diversification despite ongoing international sanctions and economic challenges. Iran’s banking system is anchored by the Central Bank of Iran, known as Bank Markazi, which holds the exclusive authority to issue the national currency and supervise all banking institutions within the country, both state-owned and private. Bank Markazi’s regulatory functions encompass monetary policy implementation, financial stability oversight, and the management of foreign exchange reserves. Its role is critical in maintaining the integrity and functionality of Iran’s financial system amid complex domestic and international economic conditions. In parallel to the Central Bank, the Organization of Islamic Economics operates as a distinct banking authority, functioning as a quasi-central bank specifically for the issuance of Qard al-Hasan loans. These interest-free loans are provided in accordance with Islamic ethical principles, emphasizing benevolence and social welfare. The Organization of Islamic Economics operates outside the direct oversight of Bank Markazi, reflecting a dual structure within Iran’s financial governance that accommodates both conventional and Islamic financial instruments. This organization supervises approximately 1,200 Islamic loan funds out of a total of 2,500 such funds operating in Iran, effectively managing nearly half of the country’s Islamic microfinance and loan activities on behalf of the Central Bank. These funds play a vital role in extending credit to individuals and small enterprises under Sharia-compliant terms, thereby promoting financial inclusion within the framework of Islamic finance. Iran’s commercial banking sector comprises several banks with extensive branch networks throughout the country, facilitating widespread access to banking services. In addition to these commercial banks, Iran maintains two development banks dedicated to providing long-term financing for industrial and infrastructural projects. Complementing these institutions is a specialized housing bank focused on home mortgages, reflecting efforts to address the country’s housing finance needs through targeted lending programs. The Iranian government initiated the privatization of the banking sector in 2001, marking a shift toward liberalization and increased private sector participation. This process involved the issuance of licenses to two newly established privately owned banks, breaking the state’s monopoly over banking services and introducing competitive dynamics into the financial market. The privatization aimed to enhance efficiency, improve customer service, and attract investment within the banking industry. Despite these developments, state-owned commercial banks continued to dominate credit allocation, primarily lending to government entities, bonyad enterprises (charitable trusts with significant economic influence), large private firms, and a relatively small group of approximately four thousand wealthy or well-connected individuals. This concentration of lending reflected structural inequalities in access to finance, with smaller businesses and ordinary citizens often facing significant barriers. Most Iranians encountered difficulties in obtaining small home loans, highlighting challenges in the availability and accessibility of affordable mortgage financing. In contrast, a select group of 90 individuals reportedly secured loan facilities totaling $8 billion, underscoring the disparity in credit distribution and the preferential treatment afforded to certain borrowers (citation needed). This imbalance pointed to systemic issues within the banking sector related to credit allocation and financial inclusivity. In 2009, the General Inspection Office of Iran reported that banks collectively held approximately $38 billion in delinquent loans, a figure substantially higher than the banks’ capital base, which stood at only $20 billion (citation needed). This significant level of non-performing loans raised concerns about the financial health and stability of the banking system, indicating vulnerabilities related to credit risk management and regulatory oversight. Between 2000 and 2007, foreign transactions involving Iran amounted to $150 billion, encompassing both private and government lines of credit. This volume of international financial activity reflected Iran’s engagement with global markets despite geopolitical challenges and sanctions. By 2007, Iran held $62 billion in assets abroad, representing its international financial reserves and investments. In 2010, Iran attracted nearly $11.9 billion in foreign capital inflows, comprising $3.6 billion in foreign direct investment (FDI), $7.4 billion from international commercial bank loans, and approximately $900 million from loans and projects provided by international development banks. These inflows demonstrated Iran’s ability to secure significant external financing to support its economic development, notwithstanding the complex international environment. As of 2010, the Tehran Stock Exchange listed shares of more than 330 registered companies, reflecting a diverse range of sectors and industries represented on the exchange. By 2011, the market capitalization of these listed companies was valued at approximately $100 billion, underscoring the growing scale and significance of the TSE within Iran’s financial system and its role in mobilizing domestic capital. The insurance sector in Iran accounted for just under 1% of the country’s GDP in 2008, a relatively low proportion attributed in part to the low average income per capita. This limited penetration of insurance services highlighted the sector’s underdevelopment and the challenges faced in expanding insurance coverage among the population. The insurance market was dominated by five state-owned firms, four of which actively engaged in commercial insurance activities. The leading insurer was the Iran Insurance Company, followed by Asia Insurance, Alborz Insurance, and Dana Insurance. These firms collectively held a substantial share of the market, reflecting the state’s prominent role in the provision of insurance services. In the fiscal year 2001/02, third-party liability insurance constituted 46% of total insurance premiums, making it the largest segment within the market. Health insurance accounted for 13% of premiums, fire insurance represented 10%, and life insurance comprised 9.9%. This distribution of premiums indicated the relative importance of different insurance products and the prevailing demand patterns within the Iranian insurance industry.

The broadcast media landscape in Iran has been predominantly state-controlled, encompassing a network of five national radio stations and five national television networks, complemented by numerous local radio and television stations distributed throughout the country. This centralized control has shaped the dissemination of information and cultural programming, reflecting governmental priorities and regulatory frameworks. The state’s extensive involvement in broadcasting has ensured a broad reach across urban and rural areas, facilitating nationwide communication while maintaining tight oversight over content and messaging. By 2008, Iran’s telecommunications infrastructure had developed to the extent that there were 345 telephone lines per 1,000 residents, indicating a substantial penetration of fixed-line telephony services across the population. Concurrently, the number of personal computers per 1,000 residents stood at 106, reflecting a moderate level of computer ownership and access. These figures illustrate the state of technological adoption during this period, highlighting both the progress made in expanding telecommunications networks and the challenges remaining in achieving universal access to modern communication tools. The mid-1990s marked a turning point in the affordability and accessibility of personal computers for home use within Iran. As prices decreased and availability improved, a rapid increase in demand for Internet access emerged across the country. This surge was driven by a growing middle class and an expanding youth population eager to engage with global information networks, educational resources, and emerging digital communities. The increased computer penetration catalyzed the development of Internet infrastructure and services, fostering a nascent online culture that would continue to evolve in the subsequent decades. By 2010, Iran had ascended to become the country with the third largest number of bloggers worldwide, a testament to the vibrant and active online content creation community that had developed despite regulatory and censorship challenges. This proliferation of blogs reflected a diverse range of voices and perspectives, often serving as alternative platforms for social commentary, political discourse, and cultural expression. The blogging phenomenon underscored the complex relationship between technology adoption and state control, as Iranian users navigated restrictions while leveraging digital tools to communicate and share information. The expansion of Internet access to the general public was formally initiated in 1998 when the Ministry of Post, Telegraph & Telephone, later renamed the Ministry of Information & Communication Technology, began selling Internet accounts directly to consumers. This policy shift marked a significant milestone in democratizing Internet availability, transitioning from limited institutional and academic use to widespread public engagement. The ministry’s role in facilitating consumer Internet access laid the foundation for the rapid growth of online services, digital communication, and e-commerce within Iran. In 2006, the economic significance of Iran’s telecommunications industry was underscored by revenues estimated at $1.2 billion. This figure highlighted the sector’s contribution to the national economy and its potential as a driver of technological innovation and employment. The telecom industry’s financial performance reflected increasing demand for mobile and fixed-line services, Internet connectivity, and related infrastructure investments, positioning it as a key component of Iran’s broader economic development strategy. The same year, Iran’s Internet Service Provider (ISP) market was notably privatized and competitive, with a total of 1,223 ISPs operating exclusively in the private sector. This extensive network of providers facilitated diverse consumer choices and fostered competition that helped improve service quality and accessibility. The privatization of ISPs represented a significant departure from state monopoly models, encouraging entrepreneurship and investment in the digital economy while still operating under regulatory oversight. By 2012, Iran had established itself as the largest mobile market in the Middle East, with 83.2 million mobile subscriptions recorded. This vast subscriber base reflected the widespread adoption of mobile telephony across urban and rural populations, driven by increasing affordability and network coverage expansion. Additionally, approximately 8 million smartphones were in use by 2012, indicating a growing penetration of advanced mobile devices capable of supporting Internet access, multimedia applications, and social networking. The proliferation of smartphones further accelerated digital engagement and transformed communication patterns within Iranian society. According to data from the World Bank, Iran’s information and communications technology (ICT) sector contributed approximately 1.4% to the country’s Gross Domestic Product (GDP) in 2008. While this percentage may appear modest, it represented a significant and growing segment of the national economy, reflecting the sector’s role in fostering innovation, productivity improvements, and diversification beyond traditional industries. The ICT sector’s contribution underscored its strategic importance in Iran’s economic planning and development agendas. Employment within the ICT sector was substantial, with around 150,000 individuals engaged in various capacities as of the late 2000s. Of these, approximately 20,000 were employed specifically in the software industry, highlighting the emergence of software development as a specialized and vital component of the broader ICT ecosystem. This workforce supported a range of activities including software design, programming, system integration, and maintenance, contributing to both domestic technological advancement and export potential. In 2002, Iran had registered approximately 1,200 IT companies, reflecting a burgeoning industry characterized by entrepreneurship and innovation. Among these companies, 200 specialized in software development, underscoring the sector’s growing sophistication and focus on producing domestically developed applications and solutions. The presence of such a significant number of IT enterprises indicated a maturing market and a foundation for sustained growth in technology-driven economic activities. Software exports from Iran reached an estimated $400 million in 2014, demonstrating the country’s capacity to compete in international markets despite geopolitical and economic challenges. This export figure, although cited without a specific source, suggested a positive trajectory for the software industry, driven by increasing global demand for specialized applications and services. The growth in software exports also reflected the effectiveness of domestic talent development and the ability to leverage technological expertise for economic gain. By the end of 2009, Iran’s telecommunications market had become the fourth-largest in the Middle East, valued at $9.2 billion. This valuation underscored the sector’s rapid expansion and its critical role in the regional communications landscape. Projections anticipated that the market would grow to $12.9 billion by 2014, reflecting continued investment, technological upgrades, and rising consumer demand for advanced telecom services. Between 2009 and 2014, the telecom sector experienced a compound annual growth rate (CAGR) of 6.9%, indicating steady and sustained expansion. This growth rate was driven by factors such as increased mobile penetration, the rollout of new technologies including 3G and 4G networks, and the diversification of service offerings encompassing data, voice, and multimedia communications. The sector’s robust growth contributed to broader economic development objectives and enhanced Iran’s connectivity both domestically and internationally.

As of 2011, Iran possessed an extensive paved road network totaling approximately 173,000 kilometers (107,000 miles), with about 73 percent of these roads being paved. This comprehensive network facilitated connectivity between most towns and all cities throughout the country, playing a crucial role in domestic transportation and economic activities. The development and maintenance of this road infrastructure allowed for efficient movement of goods and people, linking rural areas with urban centers and supporting regional integration. The paved roads significantly contributed to reducing travel times and improving safety, thereby enhancing overall accessibility across Iran’s diverse geographical landscape. In 2007, the level of personal vehicle ownership in Iran was reflected by the presence of roughly 100 passenger cars per 1,000 inhabitants. This figure indicated a moderate rate of automobile ownership relative to the population, highlighting the growing reliance on private vehicles for transportation. The increasing number of passenger cars underscored the expanding middle class and rising demand for personal mobility, which in turn influenced urban planning and traffic management policies. However, this growth also posed challenges related to congestion, pollution, and infrastructure strain, necessitating ongoing investments in road expansion and public transportation alternatives. Iran’s rail infrastructure comprised 11,106 kilometers (6,901 miles) of operational train tracks, supporting both freight and passenger transportation across the country. The railway network served as a vital component of Iran’s transport system, enabling the efficient movement of bulk goods such as minerals, agricultural products, and industrial materials, as well as providing an affordable and reliable mode of travel for passengers. The rail lines connected major cities and industrial hubs, facilitating domestic trade and contributing to regional economic development. The government prioritized railway expansion and modernization to enhance capacity, safety, and speed, recognizing the strategic importance of rail transport in reducing road congestion and environmental impact. Bandar-Abbas, a port city strategically located on the Strait of Hormuz, functioned as Iran’s primary port of entry for imported goods. This port played a pivotal role in the country’s international trade, serving as the main gateway for the inflow of commodities, raw materials, and consumer products. Once goods arrived at Bandar-Abbas, they were distributed throughout Iran via a combination of trucks and freight trains, ensuring efficient inland logistics and supply chain management. The port’s location on a critical maritime chokepoint underscored its geopolitical and economic significance, as it facilitated access to global shipping routes and supported Iran’s export and import activities. The Tehran–Bandar-Abbas railroad, inaugurated in 1995, established a crucial link between Bandar-Abbas and Central Asia by connecting the southern port city to Tehran and Mashhad in the northeast. This railway line significantly enhanced regional trade connectivity by providing a direct and reliable transportation corridor for goods and passengers between the Persian Gulf and Central Asian markets. The route facilitated the movement of exports and imports, reducing transit times and transportation costs, thereby strengthening economic ties and fostering cross-border cooperation. The completion of this railroad marked a milestone in Iran’s efforts to integrate its transport infrastructure with broader regional networks, promoting economic diversification and development. In addition to Bandar-Abbas, Iran’s maritime trade was supported by several other major ports, including Bandar Anzali and Bandar Torkaman on the Caspian Sea, as well as Khoramshahr and Bandar Imam Khomeini on the Persian Gulf. These ports played complementary roles in handling cargo shipments, serving different geographic regions and trade routes. Bandar Anzali and Bandar Torkaman facilitated trade across the Caspian region, connecting Iran with neighboring countries such as Azerbaijan, Russia, and Turkmenistan. Meanwhile, Khoramshahr and Bandar Imam Khomeini on the Persian Gulf supported the export of oil, petrochemical products, and other commodities, contributing to the country’s economic vitality. The development and modernization of these ports were integral to expanding Iran’s maritime capabilities and enhancing its position in international shipping. Iran’s air transportation infrastructure included numerous cities equipped with passenger and cargo airports, which supported both domestic and international air travel. These airports enabled connectivity across the country’s vast territory and linked Iran to global destinations, facilitating tourism, business travel, and cargo transport. Iran Air, the national airline established in 1962, operated a fleet that provided regular domestic and international flights, serving as a key player in the country’s aviation sector. The airline’s operations contributed to the development of Iran’s air transport network, promoting economic integration and accessibility. Efforts to expand airport capacity and modernize facilities were ongoing to meet the increasing demand for air travel and enhance service quality. All large Iranian cities featured bus transit systems that played an essential role in urban mobility. These systems provided affordable and accessible transportation options for millions of residents, helping to alleviate traffic congestion and reduce environmental pollution. In addition to municipal bus services, private companies operated intercity bus services that connected different regions, improving regional mobility and supporting economic activities. The presence of extensive bus networks underscored the importance of public transportation in Iran’s urban planning strategies, aiming to offer efficient alternatives to private car usage and enhance the overall quality of life in metropolitan areas. Major cities such as Tehran, Mashhad, Shiraz, Tabriz, Ahvaz, and Isfahan undertook significant projects to construct underground railway systems, commonly known as metro systems, to expand urban transit infrastructure. These metro projects aimed to provide rapid, reliable, and environmentally friendly transportation options to meet the growing demands of urban populations. The development of underground railways was part of a broader strategy to reduce surface traffic congestion, lower air pollution, and improve the efficiency of public transit networks. The implementation of these metro systems involved substantial investments in technology, engineering, and urban planning, reflecting the government’s commitment to modernizing transportation and enhancing urban livability. The transportation sector in Iran employed over one million individuals, highlighting its role as a significant source of employment within the national economy. In 2008, this sector contributed approximately nine percent to Iran’s gross domestic product (GDP), demonstrating its substantial economic impact. The diverse transportation modes, including road, rail, maritime, and air transport, collectively supported trade, industry, and daily commuting needs. The sector’s growth was closely linked to broader economic development goals, with investments aimed at improving infrastructure, increasing capacity, and fostering technological advancement. The employment generated by transportation activities also contributed to social stability and income generation across various regions of the country. In August 2022, the cabinet of President Ebrahim Raisi approved legislation permitting the importation of fully assembled foreign cars, effectively reversing a previous ban that had been in place. This policy shift marked a significant change in Iran’s automotive import regulations, allowing for greater availability of foreign-manufactured vehicles in the domestic market. The decision was motivated by the need to provide consumers with access to safer and more affordable cars, as well as to stimulate competition and improve the quality of vehicles available to Iranian citizens. This legislative approval reflected evolving economic priorities and responses to market demands within the automotive sector. The ban on importing fully assembled foreign cars had originally been enacted in July 2018 by President Hassan Rouhani’s administration in response to international sanctions imposed on Iran. These sanctions severely restricted Iran’s ability to engage in international trade and finance, impacting various sectors including the automotive industry. The ban aimed to protect domestic car manufacturers and mitigate the effects of sanctions on the local economy. However, it also limited ordinary Iranian citizens’ access to safe and affordable vehicles, as domestic production struggled to meet quality and demand standards. The restrictions on imports contributed to challenges in the automotive market, prompting calls for policy reconsideration, which ultimately led to the 2022 reversal by the Raisi government.

Iran holds a prominent position in the global energy markets as a founding member of both the Organization of Petroleum Exporting Countries (OPEC) and the Organization of Gas Exporting Countries. These memberships underscore Iran’s strategic importance in the production and export of hydrocarbons, enabling it to influence oil and gas policies on an international scale. The country’s energy sector has historically been a cornerstone of its economy, with petroleum exports constituting a substantial portion of its foreign trade. In 2018, petroleum exports accounted for 56% of Iran’s total exports, amounting to a value of approximately $60.2 billion. This heavy reliance on oil revenues reflects the central role of the hydrocarbon sector in Iran’s economic structure and fiscal budget. However, Iran has sought to diversify its export base beyond oil, recognizing the vulnerabilities associated with dependence on a single commodity. By 2011, projections indicated that Iran’s non-oil exports would reach parity with its imports, both valued at around $43 billion. This marked a significant strategic shift aimed at broadening the country’s economic resilience and reducing susceptibility to fluctuations in global oil prices and sanctions. The diversification efforts have focused on a variety of non-oil products, with major exports including agricultural and industrial goods such as pistachios, liquefied propane, methanol (methyl alcohol), hand-woven carpets, and automobiles. Additionally, Iran exports a range of other commodities including copper, cement, leather, textiles, fruits, saffron, and caviar, reflecting the country’s varied natural resources and artisanal industries. The export of technical and engineering services has also been a notable component of Iran’s non-oil trade portfolio. In the fiscal year 2007, Iran exported technical and engineering services valued at $2.7 billion. A significant portion of these services was directed towards neighboring and regional markets, with approximately 40% delivered to countries in Central Asia and the Caucasus. Iraq received around 30% of these services, equating to $350 million, while nearly 20%, or $205 million, were exported to African nations. Iranian firms have been actively involved in developing critical infrastructure projects abroad, including energy infrastructure, pipelines, irrigation systems, dams, and power generation facilities. These projects highlight Iran’s capacity to export expertise and technical services, thereby enhancing its economic engagement beyond traditional commodity exports. Iran’s efforts to expand non-oil exports have been supported by the development of its industrial base and the utilization of an educated and motivated workforce. The country’s strategic geographic location near a market of roughly 300 million people—encompassing the Caspian region, Persian Gulf, and Economic Cooperation Organization (ECO) member countries—has been leveraged to facilitate trade and economic cooperation. This positioning enables Iran to act as a regional hub for commerce and industrial exchange, fostering closer economic ties with neighboring states and broader regional markets. Iran’s import activities have experienced rapid growth over the first decade of the 21st century. Total import volume surged by 189%, increasing from $13.7 billion in 2000 to $39.7 billion in 2005. This upward trend continued, with imports reaching $55.189 billion in 2009. Such expansion reflects both the growing demand within Iran for foreign goods and the country’s increasing integration into global trade networks. The principal trading partners of Iran have included major global economies such as China, France, Germany, India, Italy, Japan, Russia, and South Korea. Historically, the United States played a significant role in Iran’s economic and military development from 1950 until 1978, serving as the foremost partner in the modernization of Iran’s infrastructure and industrial sectors prior to the 1979 Islamic Revolution. Among Iran’s trading relationships, Germany holds a particularly strong economic connection, evidenced by the fact that approximately 80% of machinery and equipment used in Iran are of German origin. This reflects decades of industrial cooperation and technology transfer between the two countries. In response to geopolitical developments and sanctions, Iran took a decisive step in March 2018 by officially banning the use of the US dollar in trade transactions. This policy aimed to circumvent the impact of US sanctions and reduce dependence on the dollar as the dominant currency in international trade. Following this move, in July 2018, France, Germany, and the United Kingdom agreed to continue trading with Iran without using the US dollar as a medium of exchange, demonstrating a coordinated effort among European nations to maintain economic ties with Iran despite US pressure. In terms of trade volumes, data from 2016 reveals that Iran’s top import partner was the United Arab Emirates (UAE), with imports valued at $15.958 billion, representing 27.6% of total imports. The European Union (EU) 28 countries collectively accounted for $7.755 billion, or 13.4%, while China followed closely with imports totaling $7.604 billion, or 13.1%. On the export side, China was Iran’s largest destination in 2016, receiving goods worth $12.715 billion, which constituted 29.8% of total exports. India was the second-largest export market with $7.061 billion (16.5%), followed by the EU 28 at $5.181 billion (12.1%). Other significant export destinations included South Korea, Turkey, Japan, Afghanistan, the UAE, Taiwan, and Oman, illustrating Iran’s broad and diversified export reach across Asia, Europe, and the Middle East. Since the mid-1990s, Iran has intensified its “South–South integration” efforts, focusing on strengthening economic cooperation with developing countries. This policy has fostered closer ties with nations such as Syria, India, China, South Africa, Cuba, and Venezuela. These partnerships have been driven by shared political and economic interests, as well as mutual efforts to counterbalance Western economic dominance and sanctions. The rapid expansion of Iran’s trade with India exemplifies this trend; bilateral trade surpassed $13 billion in 2007, marking an 80% increase within a single year. This surge reflects the deepening of economic ties, including energy cooperation, infrastructure investment, and trade in goods and services. Iran has also actively pursued the expansion of trade relations with regional neighbors Turkey and Pakistan. These countries share common objectives with Iran in establishing a common market in West and Central Asia through the framework of the Economic Cooperation Organization (ECO). The ECO aims to enhance regional economic integration, facilitate trade, and promote investment among member states, thereby fostering economic development and stability across the region. Iran’s engagement in this initiative underscores its commitment to regional economic cooperation and the creation of interconnected markets. Since 2003, Iran has increased its investments in neighboring countries, particularly Iraq and Afghanistan, reflecting a broader regional economic engagement strategy. These investments have targeted sectors such as infrastructure, energy, and construction, contributing to the reconstruction and development efforts in post-conflict environments. Iran’s economic involvement in these countries not only supports their recovery but also strengthens bilateral ties and creates new markets for Iranian goods and services. The Iranian diaspora has played a significant role in the country’s international economic relations, particularly in the United Arab Emirates. In Dubai, it is estimated that Iranian expatriates control over 20% of the local economy and comprise a similar proportion of the population. This substantial presence has facilitated trade, investment, and business linkages between Iran and the UAE, with the diaspora acting as a bridge for economic exchange. Migrant Iranian workers abroad have also contributed to the domestic economy through remittances, although in 2006 these remittances amounted to less than $2 billion. While significant, this figure indicates that remittance flows remain a modest component of Iran’s overall foreign exchange earnings. Trade between Dubai and Iran has experienced remarkable growth, with volumes tripling between 2005 and 2009 to reach $12 billion. This expansion has been supported by investments in real estate and import-export businesses collectively known as the Bazaar. These enterprises supply consumer goods to Iran and other countries, serving as vital conduits for trade and commerce in the region. The Bazaar network exemplifies the informal yet substantial economic linkages that underpin Iran’s trade relations with the Gulf region. Despite the growth in formal trade channels, a significant portion of Iran’s imported and exported goods—estimated at one-third—passes through the black market, underground economy, and illegal jetties. This informal trade undermines the formal economy by eroding tax revenues, complicating customs enforcement, and distorting market dynamics. The prevalence of smuggling and unregulated trade presents ongoing challenges for Iran’s policymakers as they seek to regulate commerce, protect domestic industries, and ensure compliance with international trade standards. The existence of these parallel trade networks reflects both the demand for goods outside official channels and the difficulties posed by sanctions, tariffs, and bureaucratic obstacles in formal trade processes.

During the 1990s and early 2000s, Iran engaged in a series of indirect oilfield development agreements with foreign firms, employing contractual frameworks such as buyback contracts to attract foreign capital and technical expertise. Under these buyback arrangements, foreign contractors provided the necessary project financing and undertook the development of oil and gas fields, with the understanding that they would recoup their investments through an allocated share of the production output. After a predetermined period, typically spanning several years, operational control of the developed fields was transferred back to the National Iranian Oil Company (NIOC), marking the completion of the contractual obligations. This model allowed Iran to leverage foreign investment and technology without ceding ownership or long-term operational control of its hydrocarbon resources, reflecting a cautious approach to foreign direct investment (FDI) in the strategically vital energy sector. Despite these efforts to engage foreign partners, the inflow of foreign investment into Iran was significantly hindered by a combination of unfavorable or complex operating requirements and the impact of international sanctions. The regulatory environment during the early 2000s remained challenging for foreign investors due to bureaucratic obstacles, restrictive legal frameworks, and a lack of transparency, which complicated the process of establishing and operating businesses in the country. Moreover, the imposition of international sanctions, particularly those targeting Iran’s energy sector and financial institutions, further constrained foreign firms’ ability to invest and repatriate profits, thereby limiting the attractiveness of the Iranian market. Although the Iranian government undertook measures to liberalize relevant regulations and improve the investment climate, these reforms were insufficient to fully overcome the structural and geopolitical barriers that deterred many potential investors. Between the Iranian calendar years 1372 (1993) and 1386 (2007), Iran attracted a cumulative total of $24.3 billion in foreign investment. This figure reflects the gradual, albeit limited, success of Iran’s attempts to integrate into the global economy and attract capital inflows despite prevailing challenges. The investment was distributed across various sectors, with a notable concentration in industries aligned with Iran’s strategic priorities and comparative advantages. The Economist Intelligence Unit (EIU) projected a significant increase in Iran’s net foreign direct investment, estimating that FDI inflows would double between 2010 and 2014. This optimistic forecast was predicated on expectations of gradual improvements in Iran’s investment climate, potential easing of sanctions, and the country’s large domestic market offering substantial growth opportunities. Foreign investors in Iran concentrated their activities primarily in several key sectors that aligned with the country’s resource endowments and industrial capabilities. The energy sector, encompassing oil, gas, and petrochemicals, remained the dominant recipient of foreign capital due to Iran’s vast hydrocarbon reserves and the strategic importance of energy exports. Vehicle manufacturing attracted considerable investment, reflecting Iran’s ambitions to develop a domestic automotive industry capable of serving both local and regional markets. Copper mining also drew foreign interest, leveraging Iran’s mineral wealth. Other sectors that saw notable foreign investment included construction, utilities, telecommunications, pharmaceuticals, clothing, and food and beverages. This diversification of investment activities demonstrated the multifaceted nature of Iran’s economy and the varied opportunities available to foreign firms willing to navigate the country’s complex business environment. Iran’s membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provided a framework for protecting foreign investors against non-commercial risks such as expropriation, breach of contract, and political instability. This affiliation was intended to enhance investor confidence by offering guarantees and insurance mechanisms that mitigated some of the risks associated with investing in Iran. However, despite this institutional support, other factors such as sanctions and domestic regulatory challenges continued to pose significant obstacles to attracting and retaining foreign investment. In 2006, the combined net worth of Iranian citizens living abroad was estimated at approximately $1.3 trillion. This substantial diaspora wealth represented a potential source of investment capital and economic engagement with the homeland, although the extent to which this wealth was mobilized for direct investment in Iran varied due to legal, political, and economic constraints. The Iranian diaspora’s financial resources underscored the potential for leveraging expatriate capital to support domestic economic development and foreign investment initiatives. According to the head of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), Iran ranked 142nd out of 181 countries in working conditions in 2008. This low ranking reflected challenges related to labor market regulations, workplace safety, labor rights, and overall employment practices, which collectively impacted the country’s attractiveness as a destination for foreign investment. In the same year, Iran’s performance across various business environment indicators revealed a mixed and often unfavorable picture. The country ranked 96th in business start-ups, indicating moderate ease in establishing new enterprises, but fared poorly in obtaining permits (165th), employment conditions (147th), and asset registration (147th). Other rankings included 84th in obtaining credit, 164th in legal support for investments, 104th in tax payments, 142nd in overseas trade, 56th in contract feasibility, and 107th in bankruptcy procedures. These rankings highlighted systemic inefficiencies and regulatory complexities that hindered business operations and investment, underscoring the need for comprehensive reforms to improve Iran’s investment climate. Between 1992 and 2008, firms from over 50 countries invested in Iran, reflecting the country’s broad international engagement despite geopolitical challenges. The largest sources of foreign investment originated from Asia and Europe, regions with longstanding economic ties and strategic interests in Iran. Asian countries collectively invested a total of $11.6 billion across 190 projects, with leading investors including India, the United Arab Emirates (UAE), Singapore, Indonesia, and Oman. These countries pursued opportunities in sectors such as energy, infrastructure, and manufacturing, driven by geographic proximity and complementary economic interests. European countries contributed approximately $10.9 billion through 253 projects, with major investors comprising Germany, the Netherlands, Spain, the United Kingdom, Turkey, Italy, France, and other European nations. European investment focused on diverse sectors, including industrial manufacturing, telecommunications, and mining, reflecting the multifaceted nature of Iran’s economy and the strategic importance of maintaining economic relations despite political tensions. North American investors, including those from Canada, Panama, the United States, and Jamaica, participated in seven projects totaling about $1.4 billion. The relatively limited scale of North American investment was largely attributable to stringent U.S. sanctions and regulatory restrictions that constrained the ability of firms from these countries to engage with Iran. Investments from Africa, primarily originating from Mauritius, Liberia, and South Africa, amounted to approximately $8 billion, although the exact number of projects was unspecified. African investors tended to focus on sectors such as mining, agriculture, and trade, leveraging regional connections and emerging market opportunities. Australian investors participated in a single project with a total investment of $682 million, indicating a more limited but notable engagement with the Iranian market. The partial lifting of international sanctions in the mid-2010s had broader economic implications that extended beyond the energy sector, opening new avenues for foreign investment and trade. The New York Times reported that consumer-oriented companies could find significant opportunities in Iran’s large market, which comprised approximately 81 million consumers. A substantial proportion of this population was young and exhibited a preference for Western products, signaling strong demand for consumer goods, technology, and services. This demographic profile, combined with rising incomes and urbanization, positioned Iran as an attractive destination for multinational corporations seeking to expand their market presence. Iran’s consumer goods market was projected to grow by $100 billion by 2020, reflecting anticipated increases in domestic consumption and the potential for import substitution and local production. This growth forecast underscored the importance of consumer sectors as engines of economic expansion and as focal points for foreign direct investment. In 2015, Iran was regarded by investment and trading firms as “a strong emerging market play,” highlighting the country’s potential to attract capital and generate returns amid ongoing economic reforms and gradual reintegration into the global economy. Opening Iran’s market to foreign investment was viewed as potentially beneficial for multinational firms across both manufacturing and service sectors. Analysts estimated that new investment opportunities could be valued between $600 billion and $800 billion over the following decade, encompassing a wide range of industries such as automotive manufacturing, petrochemicals, telecommunications, infrastructure development, and consumer goods. This expansive investment potential reflected Iran’s strategic location, resource wealth, large domestic market, and aspirations for economic modernization. However, realizing this potential depended heavily on the resolution of geopolitical tensions, the lifting of sanctions, and the implementation of structural reforms aimed at improving the business environment and legal protections for investors.

The Economic Cooperation Organization (ECO) is a regional intergovernmental organization that includes Iran among its member states, situating the country within a broader geographical and economic framework that spans parts of Central Asia, the Middle East, and South Asia. This regional grouping seeks to promote economic, technical, and cultural cooperation among its members, thereby enhancing trade and investment opportunities across shared borders. Iran’s participation in the ECO reflects its strategic position as a bridge between these diverse regions, facilitating the flow of goods, services, and capital. The map of ECO member states highlights Iran’s central location, underscoring its potential role as a hub for regional commerce and economic integration. Since 2005, Iran has maintained observer status at the World Trade Organization (WTO), a position that allows it to attend meetings and participate in discussions without holding full membership rights. This status marked a significant step in Iran’s engagement with the global trading system, signaling its interest in aligning with international trade norms and expanding its economic relations. However, despite this observer status, Iran has not yet achieved full membership in the WTO, a process that remains complicated by geopolitical and diplomatic challenges. The country’s observer status has enabled it to familiarize itself with WTO rules and procedures while continuing to negotiate the terms of accession. A major obstacle to Iran’s full membership in the WTO has been the consistent opposition from the United States. Washington has repeatedly blocked Iran’s bid to join the organization, citing concerns related to Iran’s nuclear program, regional policies, and broader security issues. This opposition has effectively stalled Iran’s accession process, limiting its ability to benefit fully from the multilateral trading system. The U.S. stance reflects broader tensions between the two countries and has influenced the international community’s approach to Iran’s economic integration. Consequently, Iran’s WTO membership remains a contentious issue, intertwined with diplomatic efforts and international negotiations. Iran’s observer status at the WTO was granted as a goodwill gesture by the international community, particularly aimed at facilitating progress in nuclear negotiations. This status was part of a broader strategy to encourage dialogue and cooperation by offering economic incentives and engagement opportunities. By allowing Iran to participate as an observer, the WTO and its member states sought to create a platform for Iran to demonstrate its commitment to international trade norms while simultaneously advancing diplomatic efforts to resolve nuclear-related disputes. This approach underscored the interconnectedness of economic and security considerations in Iran’s international relations. Economically, Iran exports approximately 60 products in which it holds a revealed comparative advantage, indicating sectors where it is relatively more efficient and competitive in global markets. This diverse export portfolio contributes to the country’s ranking as the 65th “most complex country” in terms of economic complexity, a measure that reflects the sophistication and diversity of a nation’s productive capabilities. Economic complexity is an important indicator of a country’s potential for sustainable growth, innovation, and development. Iran’s position suggests that while it has a moderately diversified economy, there remains significant room for advancement in terms of producing and exporting more complex and higher-value goods. Achieving full membership in the WTO would require Iran to undertake substantial reforms, particularly in areas related to intellectual property rights and legal frameworks. One of the critical conditions for accession is the enforcement of copyrights, patents, and trademarks, which necessitates a comprehensive overhaul of Iran’s existing legal and regulatory systems. Implementing these changes would align Iran’s domestic laws with international standards, thereby enhancing investor confidence and protecting innovation. However, such reforms are complex and politically sensitive, as they involve balancing national interests with the demands of global trade governance. The Iranian government has articulated a strategic goal of attracting billions of dollars in foreign investment by fostering a more favorable investment climate. This objective is closely linked to the promotion of freer trade and the reduction of barriers that have historically constrained economic openness. By improving regulatory transparency, streamlining business procedures, and enhancing legal protections for investors, Iran aims to position itself as an attractive destination for international capital. These efforts are part of a broader economic reform agenda designed to stimulate growth, diversify the economy, and integrate more fully into the global marketplace. Free trade zones such as Qeshm, Chabahar, and Kish Island are envisioned as pivotal components in Iran’s strategy to facilitate integration into global trade networks and attract foreign investment. These zones offer preferential regulatory and tax regimes, streamlined customs procedures, and infrastructural advantages to encourage both domestic and international business activities. By leveraging the strategic locations of these free trade zones, Iran seeks to create hubs of economic activity that can serve as gateways for exports and imports, as well as centers for manufacturing and services. The development of these zones is expected to enhance Iran’s competitiveness and provide a platform for deeper engagement with global supply chains. In 2010, Iran demonstrated its commitment to expanding its international trade presence by allocating $20 billion in loans to support the establishment of twenty trade centers abroad. This substantial financial investment aimed to facilitate Iranian exports, promote bilateral trade relations, and create channels for Iranian businesses to access foreign markets. The trade centers serve as commercial outposts that provide market intelligence, logistical support, and networking opportunities for Iranian companies. This initiative reflects Iran’s proactive approach to overcoming external economic challenges and underscores its ambition to become a more prominent player in global trade despite ongoing political and economic constraints.

Following the Iranian Revolution in 1979, the United States took decisive measures to sever its economic and diplomatic ties with Iran. This shift in relations was precipitated by the overthrow of the Shah and the establishment of the Islamic Republic, which the U.S. government viewed as hostile to its interests in the region. As part of this policy change, the United States imposed a comprehensive ban on Iranian oil imports, effectively cutting off a critical revenue source for Iran’s economy. Concurrently, the U.S. government froze approximately $11 billion of Iranian assets held within its jurisdiction, a move designed to exert financial pressure on the new regime and limit its ability to fund activities deemed contrary to U.S. interests. These initial sanctions set the tone for decades of economic confrontation between the two countries and significantly constrained Iran’s access to international markets. In 1996, the United States further expanded its sanctions regime by enacting the Iran and Libya Sanctions Act (ILSA), also known as the D’Amato Act. This legislation prohibited both U.S. and foreign companies from investing in or trading with Iran if such activities exceeded $20 million annually. The act was designed to deter foreign investment in Iran’s energy sector and to isolate the country economically by leveraging the global influence of the U.S. dollar and American financial institutions. The ILSA marked a significant escalation in the U.S. sanctions policy by extending its reach beyond domestic companies to include international actors, thereby amplifying the economic pressure on Iran. The law was part of a broader strategy to curb Iran’s regional influence and to punish it for its alleged support of terrorism and pursuit of weapons of mass destruction. Despite the stringent nature of the ILSA, certain exceptions were introduced beginning in 2000 to mitigate humanitarian impacts and allow for limited trade in critical sectors. Notably, exemptions were granted for pharmaceuticals and medical equipment, recognizing the necessity of these goods for the Iranian population’s health and well-being. These exceptions reflected an acknowledgment by policymakers that comprehensive sanctions could have unintended consequences on ordinary citizens and that some degree of humanitarian trade needed to be maintained. Over time, these carve-outs became an important aspect of the sanctions regime, allowing limited engagement in sectors deemed essential while maintaining overall economic pressure on the Iranian government. Iran’s nuclear program emerged as a focal point of international concern starting in 2006, as Western countries, particularly the United States and European Union members, expressed suspicions regarding the program’s intended purposes. While Iran maintained that its nuclear activities were for peaceful energy generation, many countries feared that the program was a cover for developing nuclear weapons capabilities. This suspicion led to intensified scrutiny by the International Atomic Energy Agency (IAEA) and increased diplomatic efforts to curtail Iran’s nuclear ambitions. The controversy surrounding the nuclear program became a principal justification for a series of international sanctions aimed at limiting Iran’s technological and financial resources to develop nuclear weapons. In response to these concerns, the United Nations Security Council imposed a series of sanctions targeting specific Iranian companies and entities associated with the country’s nuclear activities. These measures sought to increase Iran’s economic isolation by restricting access to international markets and technology transfers that could advance its nuclear program. The UN sanctions were comprehensive, addressing a range of sectors and activities linked to nuclear proliferation risks. They represented a multilateral effort to pressure Iran into compliance with international nuclear non-proliferation norms and to encourage transparency and cooperation with global monitoring agencies. The scope of the UN sanctions notably included restrictions on Iran’s nuclear, missile, and military exports, effectively limiting its ability to develop and disseminate weapons technology. Furthermore, the sanctions targeted investments in Iran’s critical oil, gas, and petrochemical sectors, which are central to the country’s economy and government revenues. Exports of refined petroleum products were also curtailed, aiming to reduce Iran’s capacity to generate foreign currency earnings. In addition, the sanctions extended to financial and shipping activities involving the Islamic Revolutionary Guard Corps (IRGC), as well as Iranian banks and insurance companies. These measures sought to disrupt the financial networks that supported Iran’s military and nuclear programs, thereby constraining the regime’s operational capabilities and international reach. The European Union intensified its sanctions against Iran in 2012 by joining the longstanding U.S. oil embargo, marking a significant escalation in the international community’s efforts to pressure Tehran. This move further restricted Iran’s economic activities by limiting its access to European markets and investment. The EU sanctions complemented existing U.S. measures by targeting the oil sector, which accounted for a substantial portion of Iran’s export revenues. The coordinated approach between the U.S. and EU aimed to maximize economic leverage over Iran, compelling it to negotiate on its nuclear program and other contentious issues. The 2012 sanctions had a pronounced impact on Iran’s economy, leading to reduced oil exports and increased financial isolation. A breakthrough occurred in 2015 when Iran and the P5+1 countries—the United States, United Kingdom, France, Russia, China, and Germany—reached a landmark nuclear agreement known as the Joint Comprehensive Plan of Action (JCPOA). This deal was designed to limit Iran’s nuclear program in exchange for the lifting of the main international sanctions that had crippled its economy. The JCPOA stipulated rigorous monitoring and verification mechanisms to ensure Iran’s compliance with nuclear restrictions. It was expected that the removal of sanctions would begin in early 2016, allowing Iran to re-enter global markets and access international financial systems. The agreement represented a significant diplomatic achievement and temporarily eased economic pressures on Iran. Despite the partial lifting of sanctions under the JCPOA, Iran continued to face substantial challenges in international trade, primarily due to its inability to freely transact in U.S. dollars. The dominance of the U.S. dollar in global finance meant that many international banks and companies remained cautious about engaging with Iran, fearing secondary sanctions or reputational risks. This limitation hindered Iran’s ability to fully capitalize on the economic benefits anticipated from the nuclear deal and complicated its efforts to attract foreign investment and conduct routine commercial transactions. Consequently, Iran’s economic reintegration into the global system remained constrained despite the formal easing of sanctions. Iran’s vast reserves of oil and natural gas, among the largest in the world, have long been viewed as a potential foundation for significant economic growth and increased geopolitical influence. Some analysts have posited that if Iran were able to achieve parity with prevailing global oil and gas prices, the Iranian rial could emerge as a global reserve currency. This hypothesis is based on the premise that the country’s energy wealth would underpin the currency’s stability and international acceptance. However, such an outcome would require substantial reforms, improved economic governance, and the removal of existing sanctions that currently limit Iran’s access to international financial markets. The realization of this potential remains contingent on geopolitical developments and Iran’s ability to integrate into the global economy. In 2018, the United States unilaterally withdrew from the JCPOA, signaling a dramatic shift in U.S. policy toward Iran. Following this withdrawal, the U.S. government re-imposed a broad array of sanctions targeting key sectors of the Iranian economy. These renewed sanctions focused on Iran’s oil exports, which are vital to the country’s fiscal health, as well as its petrochemical industry, shipping sector, metals trading, and banking transactions. The re-imposition of sanctions aimed to exert maximum economic pressure on Iran to renegotiate the nuclear deal on terms more favorable to U.S. interests and to curtail Iran’s regional activities deemed destabilizing. The 2018 sanctions significantly intensified Iran’s economic isolation, leading to a sharp decline in oil exports and complicating Iran’s ability to engage with international trade and finance.

The implementation of the Joint Comprehensive Plan of Action (JCPOA) marked a significant development in Iran’s international economic relations by enabling the country to purchase new aircraft, thereby alleviating some longstanding restrictions on its ability to engage in global trade. Prior to the agreement, Iran faced substantial limitations on acquiring modern commercial airplanes due to sanctions and embargoes, which had severely hampered its aviation sector and broader economic connectivity. The easing of these restrictions under the JCPOA allowed Iran to modernize its aging fleet, improve transportation infrastructure, and facilitate more efficient trade and travel, which in turn had the potential to stimulate economic growth and integration with international markets. Despite the JCPOA’s positive implications, the broader impact of sanctions on Iran’s economy remained profound. U.S. Undersecretary of State William J. Burns estimated that Iran was losing up to $60 billion annually in energy investments as a direct consequence of sanctions. This substantial reduction in capital inflows severely constrained Iran’s ability to develop its vast energy sector, including oil and gas exploration, production, and infrastructure projects. The diminished investment not only curtailed Iran’s energy output but also limited technological advancements and modernization efforts that were critical for sustaining long-term economic growth in a sector that historically constituted a major portion of the country’s revenues. Sanctions also increased the cost of imports into Iran by an average of 24%, reflecting the heightened risks, logistical challenges, and financial barriers imposed on trade. The inability to access the international dollar payment system forced Iranian businesses to rely on more expensive and less efficient methods of payment and procurement, which translated into higher prices for imported goods. This inflationary pressure affected a wide range of sectors, from consumer products to industrial inputs, thereby exacerbating the cost of living for ordinary Iranians and reducing the competitiveness of domestic industries reliant on imported components. The latest rounds of sanctions intensified the economic strain by threatening to reduce Iran’s oil revenues by approximately $50 billion annually. Given that oil exports constituted a critical source of foreign exchange and government income, such a loss represented a severe blow to the country’s fiscal stability and public expenditure capacity. The reduction in oil revenues forced the government to seek alternative sources of funding, implement austerity measures, and adjust economic policies to cope with the diminished inflows, which in turn had ripple effects throughout the broader economy. In response to the denial of access to the international dollar payment system, Iran increasingly resorted to barter trade as a means to circumvent financial sanctions. This shift in trade practices involved exchanging goods and services directly with trading partners rather than relying on conventional monetary transactions, which were hindered by restrictions on banking and currency transfers. Barter trade allowed Iran to maintain some level of international commerce despite the financial embargoes, but it also introduced inefficiencies and complexities that limited the scale and scope of trade activities. Iranian officials perceived the widespread withdrawal of international companies from the Iranian market as an “opportunity” for domestic firms to fill the resulting void. The exodus of foreign investors and multinational corporations, driven by the risk of secondary sanctions and political uncertainty, created gaps in various sectors including manufacturing, retail, and services. Iranian policymakers and business leaders viewed this as a chance to promote local industries, encourage self-reliance, and foster indigenous economic development. However, the capacity of domestic companies to fully replace foreign expertise, technology, and capital remained constrained by the broader economic challenges imposed by sanctions. The International Energy Agency (IEA) reported a dramatic decline in Iranian oil exports, which fell to a record low of 860,000 barrels per day (bpd) in September 2012, down sharply from 2.2 million bpd at the end of 2011. This precipitous drop reflected the cumulative impact of international sanctions targeting Iran’s energy sector, including restrictions on oil sales, shipping, and insurance. The decline in exports severely curtailed Iran’s foreign exchange earnings and undermined the government’s fiscal position, contributing to broader economic instability. The contraction in oil exports and the resultant loss of revenue had significant social and political repercussions within Iran. The collapse of the Iranian rial, the country’s local currency, triggered widespread public discontent and led to street protests in Tehran and other urban centers. The currency’s depreciation eroded purchasing power, increased inflation, and heightened economic uncertainty, fueling grievances among a population already struggling with rising prices and unemployment. These protests underscored the direct link between economic sanctions, fiscal distress, and social unrest in Iran during this period. September 2012 marked Iran’s lowest oil output since 1988, a year that coincided with the end of the Iran-Iraq War and reflected a period of severe economic hardship. The comparison highlighted the extent to which sanctions had reversed decades of development in Iran’s energy sector, bringing production levels back to those seen during one of the most challenging eras in the country’s modern history. This historic low underscored the effectiveness of sanctions in constraining Iran’s oil industry, albeit at significant economic and social costs. The economic impact of sanctions extended beyond aggregate output and revenues, causing welfare losses across all income groups in Iran. Studies indicated that wealthier segments of society experienced greater relative losses compared to poorer groups, as sanctions disproportionately affected sectors and activities in which higher-income individuals were more engaged. This dynamic led to a decline in income concentration and a reduction in the share of top income groups within Iran’s economy, suggesting a temporary narrowing of economic inequality driven by the adverse effects of sanctions on capital-intensive industries and luxury consumption. According to U.S. estimates, Iran’s potential to influence global crude oil prices was significant, with projections indicating that the country could reduce the price by as much as 10%. This price impact would translate into substantial savings for oil-importing countries, particularly the United States, which was estimated to save approximately $76 billion annually based on the 2008 world oil price of $100 per barrel. The implication was that sanctions on Iran not only affected its domestic economy but also had broader geopolitical and economic consequences by constraining global oil supply and maintaining higher prices. The National Iranian American Council (NIAC) reported that sanctions had cost the United States over $175 billion in lost trade and resulted in the loss of approximately 279,000 jobs. These figures highlighted the reciprocal economic costs of sanctions, demonstrating that U.S. businesses and workers were adversely affected by the restrictions on commerce with Iran. The lost trade opportunities spanned various sectors, including energy, manufacturing, and agriculture, reflecting the interconnected nature of the global economy and the unintended consequences of unilateral sanctions. Between 2010 and 2012, European Union member states experienced even greater economic losses due to sanctions on Iran, with trade revenue declines exceeding twice those suffered by the United States. Germany faced losses estimated between $23.1 billion and $73.0 billion, Italy between $13.6 billion and $42.8 billion, and France between $10.9 billion and $34.2 billion. These substantial figures underscored the deep economic ties between Iran and European countries prior to sanctions and illustrated the significant commercial disruptions caused by the embargoes. The impact on European economies contributed to political debates within the EU regarding the costs and benefits of sanctions policy. Iran’s gross domestic product (GDP) growth turned negative in 2013, contracting by 5%. This marked a sharp reversal from previous years of moderate growth and reflected the cumulative effects of sanctions, reduced oil revenues, inflation, and declining investment. The economic contraction exacerbated unemployment and poverty, placing additional strain on government resources and social services. The negative GDP growth signaled a broader economic crisis that challenged Iran’s development trajectory and fiscal sustainability. The unofficial unemployment rate in Iran reached 20% by mid-2012, indicating widespread labor market distress. High unemployment rates were driven by the contraction of key economic sectors, reduced foreign investment, and the withdrawal of international companies. The elevated joblessness contributed to social discontent and increased pressure on the government to implement policies aimed at job creation and economic stabilization. Iran’s oil exports declined from 2.5 million barrels per day in 2011 to 1.4 million barrels per day in 2014, reflecting the sustained impact of sanctions and international isolation. This nearly 44% reduction in exports significantly diminished Iran’s foreign exchange earnings and constrained the government’s budgetary capacity. The decline also affected Iran’s standing in global energy markets and limited its ability to finance domestic programs and infrastructure projects. By 2013, Iran had approximately $80 billion in foreign exchange reserves frozen overseas due to sanctions. These frozen assets represented a substantial portion of Iran’s international financial holdings and were a key leverage point for sanctioning countries seeking to pressure Tehran. The inability to access these reserves restricted Iran’s capacity to stabilize its currency, finance imports, and service external debts, thereby deepening the economic crisis. The automobile industry in Iran experienced a sharp decline, with production falling by 40% between 2011 and 2013. This downturn was attributed to sanctions that disrupted supply chains, limited access to foreign parts and technology, and reduced consumer purchasing power. The contraction of automobile manufacturing not only affected industrial output but also led to job losses and diminished Iran’s capacity to meet domestic demand for vehicles. In 2015, the U.S. government stated that Iran’s economy had become “fundamentally incapable of recovery” without a nuclear agreement with the West. This assessment reflected the belief that only a comprehensive resolution of the nuclear dispute and the lifting of sanctions could restore investor confidence, enable access to international financial systems, and revive economic growth. The statement underscored the centrality of the nuclear negotiations to Iran’s economic prospects and the broader geopolitical context. The tentative rapprochement between Iran and the United States beginning in the second half of 2013 held the potential to significantly alter geopolitical dynamics and economic opportunities. This thaw in relations raised hopes for reduced tensions in the Middle East and the reintegration of Iran into the global economy as a promising emerging market. Improved diplomatic engagement was expected to facilitate trade, investment, and cooperation on regional security issues, potentially transforming Iran’s economic landscape and its role in international affairs. In January 2019, President Hassan Rouhani publicly blamed the United States for Iran’s declining economy following the U.S. withdrawal from the nuclear deal and the re-imposition of sanctions. He estimated the damages inflicted on the Iranian economy to be between $150 billion and $200 billion, highlighting the severe financial and developmental setbacks caused by renewed sanctions. Rouhani’s statements reflected the Iranian government’s narrative that external pressures, rather than domestic policy failures, were primarily responsible for economic difficulties. Following a cyberattack in August 2024, Iranian banks were targeted by a group known as IRLeaks, which Politico described as the “worst cyberattack” in Iranian history. The attack compromised approximately 20 out of 29 Iranian credit institutions, severely disrupting financial operations and undermining public confidence in the banking system. The scale and sophistication of the cyberattack represented a significant escalation in cyber warfare targeting Iran’s critical infrastructure. The Iranian government reportedly paid millions of dollars in ransom to IRLeaks in an effort to halt the cyberattack and recover compromised data. This response indicated the severity of the breach and the challenges faced by Iranian authorities in defending against and mitigating cyber threats. The payment of ransom underscored the vulnerabilities of Iran’s financial sector and the growing importance of cybersecurity in national economic security. The Iranian supreme leader attributed the cyberattack to Israel and the United States, although he did not explicitly acknowledge the attack on the banking system. This attribution aligned with longstanding accusations by Iranian officials regarding hostile actions by these countries aimed at undermining Iran’s stability and sovereignty. The lack of direct acknowledgment of the banking system attack suggested a cautious approach in public statements amid ongoing cybersecurity concerns. Politico suggested possible involvement by the United States or Israel in the cyberattack, citing regional tensions and U.S. accusations of Iranian interference in the 2024 American elections as contextual factors. The geopolitical rivalry between Iran and these countries, combined with the strategic importance of Iran’s financial infrastructure, made such involvement plausible according to analysts. The attribution of cyber operations to state actors reflected the complex interplay of espionage, sabotage, and political signaling in the region. The hackers responsible for the attack were likely freelance operatives motivated primarily by monetary gain rather than ideological objectives. An Iranian firm reportedly paid at least $3 million to IRLeaks to cease the attack and recover data, indicating the transactional nature of the cyber incident. This dynamic highlighted the evolving landscape of cyber threats, where non-state actors and criminal groups play significant roles alongside nation-states in conducting disruptive operations.