IRAN

Bilateral trade and other economic ties involve power engineering, oil and gas, petrochemical, iron-and-steel, nonferrous metal and engineering industries, transport, communications and some other fields. The last three years increased the Russian-Iranian trade turnover 2.5-fold to bring it to an approximate US million in 1998, exports of Russian industrial products and services accounting for 90% of this.

Promoting contacts are a number of essential agreements signed within recent years. The following documents are being drawn up and soon to be ready: a protocol on long-term Russian-Iranian economic cooperation, initialled on December 28, 1995; an agreement on reciprocal investment encouragement and protection, initialled on March 6, 1998; an agreement on research and technical cooperation; and an agreement on oil and gas cooperation.

The permanent bilateral intergovernmental commission for trade and economic cooperation had a second session in Teheran, from March 3 to 6, 1998, or Esfand 12-15, 1376. Co-chairing for Russia was Deputy Prime Minister Vladimir Bulgak; for Iran, Hossein Namazi, Minister of Economic Affairs and Finance.

Trade and economic partnership involve the following basic fields:

1. Oil-and-gas industry. Bilateral cooperation in 1999 is limited to a contract with the French Totale Co., which is engaged in feasibility studies to implement the 4th and 5th stages of Project South Fars. The Gazprom has tangible prospects to take part in developing its initial stage.

Burgas Co., affiliated to the Gazprom, and Naftharan Engineering Service established an oil and gas drilling joint venture in 1998.

That year saw the following documents signed:

- a contract between the Prikaspiiskburneft oil drilling company and Iranian Drilling Co. for a joint onshore drilling venture;

- a protocol of cooperation between Zarubezhneft and Technopromexport, on the Russian side, and Iran's Ministry of Oil for joint Persian Gulf shelf drilling.

A memorandum of mutual understanding, signed in April 1999 by Russia's Ministry of Fuel and Power Industries and Iran's Ministry of Oil, envisages 11 lines of cooperation in many fields of the oil-and-gas industry, with all contracts to be obtained on a tender basis.

2. Nuclear power industry. Contacts comply with intergovernmental agreements of August 25, 1992, on cooperation in the civil use of nuclear energy and in the construction of a nuclear power plant in Iran.

In a supplement to the basic contract signed on August 29, 1998, the Russian Atomstroiexport Co. pledged to finish the construction of the Bushehr power plant on a turnkey arrangement. By the start of 1999, the partners had coordinated works to be performed to the amount of US million. Close on 900 persons were employed on the site, Russian experts and workers accounting for 300 of these.

According to a protocol signed in November 1998, Unit One is to be completed in May 2003. The talks moved the Iranian party to propose three additional units to be built.

Partnership in nuclear research and industry strictly complies with Russia's international commitments and national legislation.

3. Thermal power industry. The Russian company Technopromexport is working on contracts to build a second stage of the Shahid Montazeri plant (4x210 mWt) in Isfahan and a third stage of the Ramin (2x315 mWt) in Ahwaz.

A protocol was signed in October 1998 to verify compliance with construction contracts for these two plants concerning equipment deliveries, services and payments under an intergovernmental protocol of December 28, 1995. The plants were expected to be commissioned before August 1999. The partners confirmed readiness to step up power industrial contacts under a ten year development programme, which envisages the commissioning of power units for a total 400 mWt under contracts with Russian companies.

4. Iron-and-steel and non-ferrous metal industries. The protocol of the second session of the intergovernmental cooperation commission, March 6, 1998, envisages joint updating of the Isfahan works: construction of another coke oven battery, blast furnace No. 3, turbogenerator No. 5 at the thermal power plant and a hydrogen station, and updating 650 and 350/250 lathes. Spokesmen of the Russian amalgamations Tyazhpromexport, Zarubezhchermet and Gipromez were negotiating with the works throughout 1998 to clear up technical issues, next to start looking for financing sources.

By resolution of a maiden session of the intergovernmental cooperation commission, December 5, 1996, Zarubezhtsvetmet and Irannefco signed a contract, in March 1997, for a detail design of a nepheline complex based on the Zargah bauxite deposit in the Azerbaizhan province, with respective Russian know-how passed to the Iranian partner.

A Zarubezhtsvetmet contract is being implemented to supply equipment to a titanium concentrate works under construction in Kahnudja, Kerman province.

A delegation of Russia's Ministry of Natural Resources visited Iran, February 1999, on an invitation by the Ministry of Mines and Metals. An understanding was put on paper to involve respective Russian agencies in a number of specific projects, in particular, prognostication of ore content of alluvial structures and bauxite content in promising areas, and rare metal prospecting. Iran confirmed its interest in cooperated titanium and nepheline projects.

5. Civil aviation technology. Early in November 1998, Teheran hosted one of the regular conferences on a project which envisages Iranian-based manufacture of TU-334 aircraft. Representing Russia and Ukraine were the Tupolev research-and-production amalgamation and the Aviant aircraft works from Kiev. The delegates received a first-hand idea of the production potential of aircraft works in Teheran and Ahwaz.

6. Transport. M. Khojati, Iran's Minister of Roads and Transport, visited Moscow in mid-1998 for negotiations with Russia's Transport and Railway ministries. Summing up the talks was a memorandum to step up partnership in all kinds of transport. The parties agreed for closer links towards a North-South transport corridor via Russia and Iran, and to increase loads on a Caspian Sea automobile ferry. Ro-Ro vessels made several trips from Astrakhan to Anzali, and a ferry from Makhachkala to Nou-shahr. Further trips depend on profitability and the availability of freight at Iranian seaports.

7. Interregional cooperation. Spokesmen of the Astrakhan Region and the Tatar and Kalmyk republics attended the 2nd session of the intergovernmental cooperation commission in March 1998. The Astrakhan Region in particular maintains extensive contacts with the Gilan and Mazanderan provinces. They regularly exchange delegations, and have signed cooperation documents. The region attracts Iranian investors to its wood-processing and construction industries. Mazanderan delegates visited Astrakhan late in July 1998 to sign cooperation protocols in trade and to arrange direct transactions between the two regions' commercial banks.

Tatarstan-Iran contacts proceed from an intergovernmental memorandum for trade cooperation, signed in 1996. President Kirsan Ilyumzhinov of Kalmykia paid several visits to Teheran in 1998 to discuss prospects for maritime transit routes between Logan in Kalmykia and Anzali, Nou-shahr and Amirabad in Iran, which Kalmykia sees primarily as suitable for crude oil swaps.

A Sverdlovsk regional delegation, led by governor Eduard Rossel, visited Iran in November 1998, on an invitation by the Khurasan provincial administration. The parties summed up their talks with a memorandum of mutual understanding in economic and technological cooperation. An imbalance between the industrial potentials of the Sverdlovsk Region and Khurasan province may switch the Russian partner's contacts from a provincial level to Iranian industrial ministries and companies of national significance.

A delegation of the Komi Republic, led by Yuri Spiridonov, visited Gilan and Mazanderan in December 1998 to sign cooperation memorandums between the republic and the two Iranian provinces. Pursuant to an available understanding, further expert contacts are to solve transportation problems and determine the choice of commodities for bilateral trade.

A St. Petersburg delegation led by vice-mayor V. Grishanov visited the Isfahan province early in May 1999 to sign a twin-city treaty. A visit was expected, in mid-May, by a Kirov regional delegation led by governor V. Sergeyenkov on East Azerbaizhan's invitation.

8. Investment financing. Iranian legislation authorises foreign investment on finance and buy-back patterns, which boils down to a demand for medium- and long-term loans. Coping with this demand are solely companies with sizable funds of their own or capable to draw money from domestic or external financial markets.

Transits

With its strategically crucial geography, Iran has been an East-West bridge since times immemorial. Trade routes of global importance were crossing it, such as, for instance, the Great Silk Route from China to Europe. As sophisticated means of transportation and specific political factors were emerging, Iran lost its role of transit corridor, and it became known as an abandoned crossroads.

Recent years, however, demonstrate Iran's desire to regain a key part in serving transit freights from Europe to Southeast Asia, the Gulf and Saudi Arabia. The country's evolution into a major transit point of global significance has come into the foreground of Iranian policies. It seeks to revive the "Great Silk Route" and North-South and East-West transport corridors. Of special significance in those plans are post-Soviet Central Asian countries, which are after the greatest possible independence from Russia--in transport as everywhere else. For this, they need short cuts to the Gulf via Iran.

As transit cargos cross Iran, the country seeks to upgrade its regional and global economic role and diversify hard currency sources. Considering the Europe-Asia annual trade turnover of US trillion, of which transportation costs account for 111 billion, Iran may eventually make an annual five billion dollars on foreign-trade transits.

With this end in view, Iran is actively updating its rail and highway networks. Short cuts are blueprinted and built to link Central Asia with Gulf and Indian Ocean countries via Iran. Economic feasibility of those rotes, and Iran's ability to provide quick, safe and reliable transit transportation are highlighted in the press and in public addresses by national leaders.

Transport route development in Iran and elsewhere in the Caspian Region is lucrative to Russia by preserving its role in commodity turnover between the European Union and the Organisation of Economic Cooperation (Iran, Turkey, Pakistan, Azerbaijan, Afghanistan, Kazakhstan, Turkmenistan, Uzbekistan and Kyrgyzstan). The situation emerging in that part of the world promises good prospects to Russian corporate carriers with the progress of the North-South corridor and Russian transport services in the region.

Iran's Ministry of Roads and Transport estimates foreign commodity transits of the recent years at an annual two to tree million tons, with tangible prospects of raising them to ten million within a few years.

Fully aware of the transit amount closely depending on the terms of services, Iranian leaders have been paying major attention to the latest patterns of freight transport arrangement and regulation alongside the updating of the material and technical transport bases.

Iran had no national transit legislation prior to 1995, when the Majlis drafted and passed, in March, a law on overseas freight transport and transit via its territory. The law was meant to reinforce and streamline the legal basis for transit services. At about the same time, the Majlis instructed the ministries of Roads and Transport, and Economic Affairs and Finance, and customs agencies to draft and offer to the cabinet, within three months, rules for compliance with the new law. The government approved the rules as late as December 1998, so implementation of the law started only three years after it was passed.

The Iranian top expect the new law to encourage a spectacular growth of overseas transit transportation by removing all contradictions of the previous legislation and getting closer to universally accepted norms and regulations of transport services.

In addition to that law, effective in Iran are numerous bylaws, orders and other regulations on freight transit arrangements. A majority of these come out from customs offices, transport agencies and the Ministry of Roads and Transport. Bylaws are currently reconsidered to bring them in line with international standards. A majority of supplements and specifications grant extra privileges to carriers and cargo owners to encourage larger shipments.

Thus, the Supreme Council of the Ports and Shipping Organisation on November 7, 1998, signed a protocol which granted considerable port service discounts to ships which use Iranian ports for export, transit and container freight transportation, with the exception of oil and petroleum products. In particular, the protocol grants 75% discounts on all categories of port duties and services to all Iranian and overseas vessels unloading solid transit freights, with or without containers, in Iranian ports.

According to the Ministry of Roads and Transport, Iran is currently has bilateral transport agreements with over forty countries. It is member of leading international transport unions and signatory to essential international agreements and conventions.

As the volume of transits via Iran is growing, a chance arises to increase freight transportation between Russian and Iranian Caspian ports, resume rail haulage, and employ Russian automobile carriers in Iran and the neighbouring countries.

Bilateral contacts in that field currently proceed from understandings recorded in the protocols of the permanent commission for economic cooperation, and protocols of the Russian-Iranian commissions for maritime, automotive, railway and air transport, and protocols between a number of both countries' carriers. The documents reflect reciprocal interest in closer transport cooperation, and define practical steps to get transport corridors going, Eurasian transit included.

A Caspian ferry line lining Olya in Russia and Anzali in Iran, established in 1997, came as one of the initial steps to improve bilateral freight carriage.

As the intergovernmental cooperation commission had its second session, in March 1998, the Kalmyk republic delegation offered for consideration a project for railway and automobile passenger ferries across the Caspian from Lagan in Kalmykia to Iran, which was to serve a transport corridor from Northern Europe to Southeast Asia via Iran, the Gulf countries and Saudi Arabia. The Russian-based North-South Co. and Iran's Union of the Mostazafin signed a protocol to set up a joint venture for feasibility studies on the project. The corridor is estimated to handle an annual five million ton freight turnover.