Iran Country Brief - January 2008

Introduction

Australia has maintained a continuous diplomatic presence in Iran since our Embassy opened in Tehran in 1968. Iran opened an Embassy in Canberra in 1971 and has maintained a presence in Australia since then.

Political Overview

The 1979 Islamic revolution transformed Iran, abolishing the monarchy and establishing an Islamic Republic. The political system now comprises both elected and unelected institutions. The Supreme Leader is Iran's highest political authority and is chosen by the Assembly of Experts, a body of 86 clerics (elected on a regional basis). The President, the unicameral Islamic Consultative Assembly (or Majles) and municipal councils are elected every four years on the basis of universal suffrage. Electoral candidates are vetted by the Guardian Council, which consists of six clerics appointed by the Supreme Leader, and six legal figures, appointed by the Head of the Judiciary and approved by the Majles.

The Majles has the power to initiate bills but the Guardian Council must approve all bills passed by the Majles as consistent with Islamic law and the Iranian Constitution. The Expediency Council (with ex officio members including the President and members appointed by the Supreme Leader) can, however, pass a Majles bill into law, overriding the Guardian Council.

Reformist President Khatami was elected in 1997 and re-elected in 2001. While he sought to increase social freedoms and modernise Iran's economy, implementation of the reform agenda was largely frustrated by conservative forces. Elections in June 2005 saw Mahmoud Ahmadinejad, a hardline conservative, elected as President.

Economic Overview

Iran is a significant regional economy with a large and fast-growing population (estimated at around 70 million people) and some of the world's largest oil and gas reserves.

The economy is heavily dependent on hydrocarbon exports and economic growth is strongly influenced by oil market developments. Around 80 per cent of total export earnings are generated from oil revenues. A goal of Iranian economic policy over the last 20 years or so has been diversification of the economy away from dependence on oil earnings.

Large state-owned enterprises dominate key industry sectors, and organisations controlled by charitable religious foundations also account for a significant share of GDP. The private sector is generally confined to small and medium enterprises. The IMF has recommended that earlier efforts at economic reform be renewed to improve economic performance. President Ahmadinejad was elected on the promise of improved income redistribution but has not advanced this systematically to date. High oil prices in recent years have assisted economic growth but levels of inflation and unemployment remain high.

Bilateral Relationship

Australia’s bilateral relationship with Iran has a solid base in trade and we can conduct open and serious discussions on a range of important issues, including Iran’s nuclear program, terrorism, regional issues and human rights.

The Australian Government has consistently reinforced with Iran Australia's long-standing opposition to the proliferation of nuclear weapons and the need to comply with UN Security Council Resolutions (UNSCR) on its nuclear program. Australia, like all members of the international community, will continue to implement UNSCRs 1737 and 1747, the first of which was adopted unanimously on 23 December 2006. This resolution imposes a range of sanctions on Iran’s nuclear and ballistic missile programs. UNSCR 1747, which builds on the earlier resolution, was unanimously adopted on 24 March 2007.

Bilateral economic and trade relationship

Iran remains an important market for Australia in the Middle East, although its relative importance has declined over the last decade compared to other export destinations. Traditionally, Iran has been one of Australia's leading wheat export destinations and has also attracted interest from a range of Australian exporters and investors. Other Australian agricultural exports to Iran include barley, animal oils and fats, meat and butter. Coking coal is Australia's major non-agricultural export to Iran.

Australia's exports to Iran amounted to AU$204 million in 2006-07. Primary export items included coal and passenger motor vehicles. It is likely that a portion of Australia’s exports to Iran are transshipped through the regional entrepot of Dubai and are not captured by these figures. Imports from Iran amounted to AU$41 million over the same period. Pistachios and carpets have traditionally dominated Australia's imports from Iran. Trade in services, particularly education, has been an area of recent growth.