BMI View: The removal of most sanctions against Iran facilitates a return to economic growth;however, recovery will be slow, and Tehran's military spending will therefore remain modest on a regionalcomparison in the short- to medium-term. That said, demand for defence equipment will stay strong, as Irancontinues to provide assistance to Shi'a groups across the region; seeks to narrow the gap to rival SaudiArabia's more technologically advanced military; and invests in weapons systems to protect against apotential US/Israeli attack. Meanwhile, the government remains committed to achieving its goal of militaryself-sufficiency, and will likely seek offsets through any defence import deals over the coming decade.
Externally, Russia and China appear best placed to capture large shares of the Iranian defence market overour forecast period to 2025, as arms embargoes still remain in place for Western suppliers.
While the nuclear deal is set to hold, Iran is continuing work on its ballistic missile programme - asevidenced by its Q117 testing, which prompted strong criticism from the US Trump administration.
Tensions between Iran and the Gulf are set to persist over the coming years, given the former's continuedinvolvement in regional conflicts and continued provision of support for various Shi'a militant groups.