This update aims to provide a brief overview of key developments which have occurred in Iran during the past month and to highlight areas of future interest. In particular, the update covers notable developments in both the political arena and key economic sectors.

1. POLITICAL DEVELOPMENTS

UK and Iran appoint ambassadors for first time in five years

Nicholas Hopton has been appointed as the UK's first ambassador to Iran since 2011. The appointment comes one year after the British embassy was reopened in Tehran, following its closure four years earlier after being stormed by protesters. Iran has appointed Hamid Baeidinejad, the director general for political and international security affairs at Iran's Foreign Ministry, as its new ambassador to the UK.

2. DEVELOPMENTS IN KEY ECONOMIC SECTORS

OIL & GAS

Iran studying options for gas export to Europe

the managing director of the National Iranian Gas Export Company stated earlier this month that Iran is looking for options for exporting natural gas to Europe, which could include using the existing pipelines or constructing connections to these pipelines.

Iran to increase oil output

Despite President Rouhani stating this month that Iran supports any move to stabilise the oil markets and lift prices, Iran has said that it intends to increase its oil production to pre-sanction levels over the next few months. It is reported that Iran currently produces 3.8 million barrels of oil per day and, according to a senior official from the National Iranian Oil Company, it is expected that Iran's oil output will increase to around 4 million barrels per day by the end of the year.

Iran and China finalise US$1.2 billion refinery project deal

Iran's Oil Ministry and Chinese company Sinopec have purportedly finalised an agreement in relation to a project to develop Iran's Abadan refinery. According to the Iranian Deputy Oil Minister for Refining and Distribution of Oil Products, the project aims to reduce "fuel oil production to less than 10 percent and increase production capacity for gasoline and diesel based on Euro4 standard". It is reported that as part of the agreement, subsidiaries of Sinopec will be responsible for the implementation of the first phase of the project.

MINING

Iran signs 20 mining MOUs

According to the deputy head of the Iranian Mines and Mining Industries Development and Renovation Organisation, Iran has signed 20 MOUs with international companies for a number of mining projects.

POWER

Iran begins building nuclear power plant

On 10 September, Iran began the construction of the first of two nuclear power plants to be built in the Bushehr province. It is reported that the plant will include two 1,000 MW reactors, which are expected (as an alternative power source) to save Iran 11 million barrels of crude per year. The plant will also help to power a water desalination plant in the Bushehr province, which will increase the plant's fresh water production from between 50,000 and 60,000 cubic metres per day to 200,000 cubic metres per day. Construction of a second plant is said to be due to begin in 2018.

BANKING

Russian banks ready to enter Iran's banking sector

Whilst Western banks appear to remain reluctant to enter into Iran's banking sector due to the uncertainties surrounding remaining US sanctions, Russian banks have been reported to be keen to enter the market. This follows recently held talks between Russia and Iran's central banks on the management of closer financial cooperation, and ten of Russia's largest banks are reported to be preparing financial services for the Iranian market.

Three Iranian banks to open branches in Munich

After receiving approval from Iran's central bank to set up branches overseas, Middle East Bank, Parsian Bank and Sina Bank (which are all headquartered in Tehran) have stated that they intend to open branches in Munich. It is expected that this will make it easier for German companies hoping to export to Iran as many have found it difficult to secure financing from Western banks due to the uncertainty caused by US sanctions.

AVIATION

British Airways ("BA") resumes flights to Iran after sanctions lifted

Following the lifting of certain sanctions against Iran earlier this year, it is reported that BA will resume direct flights to Iran for the first time in four years. BA, which described Tehran as an "important destination" for the airline, will initially operate six flights between London Heathrow and the Iranian capital before progressing to a daily service later this year.

OTHER

Following the removal of certain sanctions, diplomatic and economic interest in Iran has continued and more countries have signalled their intention to strengthen ties.

Iranian President strengthens ties with Ecuador, Algeria, India and Venezuela at Non-Aligned Movement summit

On the sidelines of the Non-Aligned Movement summit held in Venezuela's Margarita Island, President Hassan Rouhani met with representatives from Ecuador, Algeria, India and Venezuela to discuss ways that Iran could strengthen its relations with these countries. These included President Rouhani indicating that Iran was prepared to share its experience in science, technology and energy with Ecuador; Iran wishing to strengthen its banking and railway cooperation with India and cooperating further on the development of the Chabahar port; and Venezuela and Iran noting that they are interested in "joint investment in industrial, infrastructural and energy areas".

In a meeting with the Bolivian president Evo Morales, President Rouhani also indicated that Iran is prepared to help Bolivia with its development programs, particularly in the banking sector. President Morales called for further contribution of Iranian firms in Bolivia's construction and economic sectors.