Boston, MA -- (SBWIRE) -- 01/14/2013 -- BMI View: We maintain our bearish outlook for Iran's construction industry with a negative forecast of -3% for 2013 due to the persistently high inflation - estimated above 20% between 2013 and 2017 - and continued pressure on Iranian finances following the latest wave of US and EU energy sanctions. We expect this downward pressure to continue largely unhampered until 2015, after which we anticipate a gradual easing and an average annual growth of around 2.1% between 2016 and 2021. However, Iran's business environment remains opaque and difficult to penetrate for any outside investors. China and Russia are, by and large, the only two countries with a continued international presence, yet even this relationship is currently experiencing setbacks.

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The Chinese government has made an offer to build a new freight rail line in Iran, according to Engineering News-Record. The freight line is aimed at allowing continuous rail transport of goods from China, through the Middle East, to Europe. The project is expected to cost US$2bn, starting in Tehran and running to Khosravi on the Iraqi border. Iran's minister responsible for transport is reported to have invited bids to construct the line. That said, we are seeing some setbacks within the China - Iran relationship, when the former recently pulled out of the development of phase 11 of the US$4.7bn South Pars gas field, as well as the US$2bn, 1,500MW, hydro-dam project in Bakhtiari. As a result we now question the viability of the planned US$1.5bn Iran to Pakistan pipeline, which is unlikely to be built without significant Chinese backing.

?? The North-South Rail Corridor, an ambitious project to create a freight-rail link between Europe, via Russia and Azerbaijan, through Iran and eventually linking to India and Southeast Asia, took a step forward in October 2012 with the unveiling of a cooperation agreement between transport ministry representatives from Russia, Azerbaijan and Iran. ?? Iran launched the Bushehr nuclear power plant during a ceremony held on September 12 2011. The 1,000 megawatt (MW) plant will undergo several test stages before becoming fully operational, reports the IRNA news agency. The west has opposed any such developments, claiming that the Iranian nuclear programme is a cover for the development of atomic weapons. ?? Iran's Ministry of Housing and Urban Development has confirmed that contracts have been agreed with construction firms for work on the Mehr Housing Scheme, according to AMEinfo. The scheme will see the construction of 430,000 urban residential units before March 2013. The deals in place relate to 260,000 of the residential units, with arrangements for the rest yet to be finalised.

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