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Iran's new guard rethinks investment strategy

As a new president takes office in Iran and deadlock hits talks with the European Union over Tehran's controversial nuclear programme, investors are pondering whether they should enter an economy that might soon be subject to sanctions.

By Amir Paivar

WHEN IRAN'S conservatives held their first meeting to choose their joint candidate for this year's presidential election, one of the five nominees was absent. He had sent a letter to the gathering saying he was too busy with work at Tehran municipality to attend electoral meetings.

Nevertheless, the 48-year-old Tehran mayor, Mahmoud Ahmadinejad, dubbed "the man of people", won the election and in August was sworn in as the Islamic Republic's sixth president. He represents a new breed of young conservatives called Developers of Islamic Iran (Abadgaran), who have been coming to the fore first in local councils; then in the majlis, Iran's parliament; and now at the centre of government.

Iran's new president has a simple formula when it comes to foreign investment: locals first. In his first press conference after June's landslide victory, he confidently said that in all areas, including oil, priority would be given to local investors. But the path to this end is not an easy one. Iran's bludgeoned economy, particularly its oil sector, is desperate for capital and know-how.

More than 80% of Iran's export revenues come from sales of crude oil, but the production capacity of the largest fields is falling by 7% each year.

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