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IRAN


 

REPUBLICAN REFERENCE

Area (sq.km)
1.648 million

Population
66,128,965

Capital
Teheran

Currency
Iranian rials

President
Mohammad Khatami-Ardakani

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Background:
Known as Persia until 1935, Iran became an Islamic republic in 1979 after the ruling shah was forced into exile. Conservative clerical forces subsequently crushed the westernising liberal element. During 1980-88, Iran fought a bloody, indecisive war with Iraq over disputed territory, which caused large-scale damage to its economy. The key current issue is how rapidly the country should open up to the modernising influences of the outside world, with a conservative faction in control of some key institutions, such as the Council of Guardians, and a reformist faction centred on elected President Khatami. 

US and Iran 
Despite the apparent improvement in the relations between the US and Iran, which had followed the 11 September terrorist attacks, by January 2002 the tension between the two countries had reached new peaks. President Bush accused Iran of being part of an "axis of evil" together with Iraq and North Korea and asked Iran to stop meddling in the internal affairs of Afghanistan and developing weapons of mass destruction. While the Iranian leadership had good reason to be worried about the intensification of American hostility, the Bush administration was clearly not planning any direct action yet. By July, however, with his call for "reform from below", President Bush appeared increasingly interested in fomenting a revolt against the Islamist regime. There are clear signs that the ruling elite felt seriously threatened and feared at least a tightening of the embargo. It seems that at least part of the several billion US$ that returned to the country during 2002 was made up of the gold reserves of the government, previously held by European central banks. By mid-May even the reformist President Khatami felt that he had to take a strong stance and warned the US administration against "threatening, insulting and humiliating" Iran. As a reaction to growing American pressure, Teheran strengthened its efforts to improve its relations with its Muslim neighbours, such as the Central Asian countries, Azerbaijan and even Saudi Arabia.
The reformist government of Iran remained in reality keen on improving relations with the US. During 2002 it gave out plenty of signals pointing in this direction. Among them, not only it stated that it was ready to accept a new, tougher resolution on Iraq and collaborated to enforce a stricter embargo, but also took the unprecedented step of declaring that a two-states solution is acceptable for Palestine, so long as the Palestinians accept it. Even the conservatives, who dominate a number of key institutions, first and foremost the Council of Guardians, and count among their members the Supreme Spiritual Leader, Ayatollah Khamenei, were not uniformly hostile to improving Iran's relations with the US, at least not at all times. Some of them argued that such an improvement would make it easier to maintain the status quo internally. Supporting a US war against Iraq could be a suitable way to buy American acquiescence for the lack of internal reforms. The majority of the conservatives, in any case, maintained at least on the surface a strong opposition to reconciliation with the US. 
Even if the reformists were willing to acquiesce to US war plans in neighbouring Iraq, they feared that in the event of a war its economy would suffer severely, not least because of a likely massive influx of refugees. The possibility of Kurdish nationalism being strengthened by a war in Iraq was also seen with apprehension in Teheran. On the whole, the Bush administration did not openly respond to hints coming from conservatives that a deal might be possible, but the press suggested that it might actually be considering to enlist some help from Iran. For sure, as the international attention turned to Iraq, from October Iran was spared the war of words that had afflicted it during the previous months. In any case, as the end of 2002 approached, the Bush administration maintained that it would welcome an internal overthrow of the Iranian regime.

Iran and the rest of the world
The main tool in the hand of the US administration for exerting pressure on Iran is increasing its isolation from the rest of the world, in particular Iran's neighbours and trading partners. During 2002, it appeared clear that the largest economies were the least likely to bow to the pressure. The European Union in particular decided to actually expand its ties to Iran. After some initial anxiety, the EU announced in July its readiness to develop closer commercial ties with Teheran, although conditionally on Iranian willingness to discuss such issues as nuclear proliferation, terrorism and human rights. There have been delays in the negotiation of deals with Russia and Japan in the oil, nuclear and defence industries, but in the end both countries looked intent on continuing their flourishing trade with Iran. The main danger to Iran could have been that Russia could soon be lured towards a more pro-American stance in exchange for economic concessions, which might include forgiving Russia's Soviet era debt in exchange for the termination of nuclear cooperation with Iran. The fact that Russia and Iran developed diverging ideas about how to deal with the resources of the Caspian Sea might have contributed to push Russia away from Iran. President Putin, however, opted instead to strike a delicate balance between continuing Russia's lucrative trade with Iran, while at the same time doing his best to appease American fears of Iranian interest in weapons of mass destruction. By December, Iran responded by showing some more willingness to tackle the issue of the Caspian Sea resources.

Economic performance
Apart from the international tensions, the economic and political situation of Iran remained highly uncertain throughout 2002. The development of oil extraction in Iran was negatively affected by project delays and by some flaws in the buy-back deals negotiated with the international investors and it increasingly looked doubtful whether Iran could succeed in increasing its production to the levels planned. A failure would have very negative consequences for the economic stability of the country, due to the rapid growth of internal consumption of oil, which was expected by some analysts to match the volume of exports as early as in 2002 itself. Petrol is sold within Iran at heavily subsidised prices, with a litre costing to the Iranian motorist just $0.063, which encourages therefore high consumption levels and waste, only makes the matter more urgent. The non-oil sector of the economy showed little sign of development in 2002. After having expanded rapidly in the early 1990s, following the adoption of an export-led growth strategy by the government, Iranian non-oil exports have stabilised at around US$5 billion. The economy, dominated by an inefficient public sector and by the notorious foundations, simply demonstrated that it lacked the dynamism to exploit the opportunities offered by the new policy. The free trade zones, set up in the past, have so far failed to generate productive economic activities and are mostly being utilised for import/export activities.

Economics and demographics of a latent crisis 
If the debate about the chances of success of Iran's plan to expand its oil production was still undecided at the end of 2002, there has never been any doubt that the Islamic Republic cannot afford a failure. Although the birth rate has been brought down to manageable levels in recent years, the baby boom generation is beginning to join the workforce, causing a terrible headache to the government. With 5.5 million high school certificate holders expected to join the job market in 2002-2005, the government needs to create more than 1,300,000 new jobs every year to prevent an increase in the unemployment rate and keep the population happy, but in 2000/2001 it succeeded in creating just 400,000. To generate the required amount of jobs, Iran's economy should grow at the yearly rate of 12%. Economic growth reached 4.5% in 2000/2001, short of the 6% target but still not a bad achievement when judged by the standards of Iran's performance over the last decade. In 2001/2002, which according to the Iranian calendar ended on 21 March, low oil prices and a cut in production ensured that growth was lower, around 3.5%. In 2002-2003 very favourable circumstances, including most of all an increase in oil prices, contributed decisively to strengthen economic growth, now expected to reach 6.4%. Many Iranian businessmen, faced with poor performances in the American and European markets, moved their assets back to Iran, which on the other hand has reduced taxes and has approved a more friendly foreign investment law. It is estimated that private funds account for a large part of at least US$7 billion which have gone back to Iran in 2002, underpinning among other things a very good performance of the Teheran stock exchange, which became one of the world's best performing, up by 30%. However, even such as performance will not be enough to cure Iran's economic ills. Moreover, during the early months of 2002 the negotiations with potential investors in Iran's oil and gas industry took a negative turn, although there were signs of improvement towards the end of the summer. In 2002 a wave of financial scandals hit executives of some Iranian oil companies involved in partnerships with foreign investors and Iranian officials showed a marked tendency to delay negotiations, fearful of attracting the attention of a judiciary which is closely aligned with the conservative faction. International investors, on the other hand, became increasingly wary of investing in the Iranian market, in particular as they began to feel that it might be possible to extract better conditions. Only state-owned companies, such as Norwegian Statoil, continued to sign contracts with the Iranian government. Starting from May there were indeed some signs of a growing willingness to offer more appealing conditions to foreign investors, as the chairman of the parliamentary energy committee, Hossein Aferideh, proposed to lengthen the buy-back contracts which represent Iran's approach to reaching agreements with international investors. At present, buy-back contracts last five to seven years, which is considered too short by many players in the oil industry. 
In 2002, the situation of the oil industry was compounded by an extensive program of well maintenance and by a series of strikes in the industry, which resulted in an estimated 8-9% decline in exports of crude Iranian oil. It is significant, however, that one of Iran's newest gas clients, Turkey, successfully bargained for lower prices after being offered a substantial discount by Russia. Russia's increasingly aggressive marketing practices might cause more problems to Iran in the future, as it continues its efforts to penetrate the European market.

Foreign investments and internal politics 
Investment in the oil industry is less controversial, because it tends to be easier to isolate from the mainstream of society and because the rewards are so obvious. But that will likely not be enough to inject enough dynamism in the Iranian economy. The opportunity to attract funds towards other sectors certainly exists. An important sign was the successful launch in July of the new euro bonds, the first denominated in a foreign currency since the Islamic revolution. Soon the government was planning new issues of euro bonds, while the Iranian parliament was asked to examine a proposal to receive oil payments in euros.
The attempts to reform the Iranian economy and political system were slowed by the opposition of the conservative faction. The Council of Guardians blocked the introduction of several laws, including the new foreign investment law, despite its approval by the parliament, forcing its amendment. Other such laws were still blocked by the Council of Guardians at the end of 2002, including a project to end the unaccountability of the foundations, which control a large part of the Iranian economy, a large-scale privatisation program, a new labour code and several others. There are however some signs that during 2002 a split began to emerge within the conservative camp, with some taking a more moderate stance. On the other hand, there were divisions within the ranks of the reformists too. At the beginning of 2002, the main item of contention among the reformists was the liberalisation of the economy, with some groups favourable to the liberalisation of the economy and others, such as the Islamic left, who were cold towards it. By the end of the year, however, the picture had been redrawn and the main fault line was now running between moderates, willing to accept Khatami's slow pace, and more radical reformers, who were clamouring for a final confrontation with the conservatives and were beginning to voice criticism of Khatami himself. The renewed pressure of the units of the "moral" police on an increasingly impatient youth, together with the ongoing repression against the reformist press, only contributes to the radicalisation of a part of the opposition. The death sentence against a reformist intellectual, Hashem Aghajari, guilty of having attacked the power of the conservative clerics during a lecture, unleashed in November a new wave of student unrest across the country, the largest after that of 1999. The resurgent student movement took most observers by surprise, as many had diagnosed its demise. 
Even the 2002-2003 Iranian budget, approved during the spring, reflected the political constraints under which Khatami and his government had to operate. Spending went up massively on the previous year, with tax cuts and massive pay rises to civil servants, whose real income would increase by 17% in real terms. The government expected to pay for a large part of such increases in expenditures through the privatisation program, which however had been stagnating for a while and might well continue to do so in the near future. Most observers therefore believe that Teheran will soon be running a massive deficit, the more so since the 2003/2004 draft budget, presented to the parliament in December, shows a 21% increase in spending on the previous year. While promising to public employees salary increases to match inflation, the draft budget counts on privatisation to reduce spending and getting some extra revenue. Reflecting the compromise character of the budget, military expenditures are also going to increase. Observers estimate that the fiscal surplus of 2001/2002 will turn to a 2.1% budget deficit this year and might still double in 2003/2004. It should be considered, however, that Iran's government debt is comparatively low, at just 19% of GDP. By the end of 2002, on the other hand, there were signs the Iran's financial situation might be improving, with a buoyant stock exchange, growing interest among international investors for the domestic car industry and a more general consolidation of Iran's image on the financial markets.
Fearful of losing his own base of support, during September President Khatami finally decided for an all-out assault on the main conservative stronghold, the Council of Guardians. During September the reformist government presented a draft law, which would greatly reduce the powers of the Council, especially as far as its ability to disqualify election candidates is concerned. The government also presented other constitutional and administrative reforms, including greater powers for the president. President Khatami warned that he might resign if his projects were not approved, leaving the country in a state of chaos. By the end of the year there was talk of a conservative coup d'état against the reformists, while the security forces were stepping up indoctrination and "ideological training" of the rank and file, possibly preparing for taking part in a violent repression. Some conservative circles were increasingly promoting former President Rafsanjani as the right man to lead a coalition of moderates, aimed at addressing the economic difficulties of the country, without touching the institutional framework. 

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Forecast 2003
Developments in and around Iran in 2003 will inevitably depend on the fate of neighbouring Iraq. Even when a war is over, an Iraq occupied by the Americans will inevitably affect Iranian internal politics. The more radical reformers and the extra-parliamentary opposition are likely to become emboldened, while it is much more difficult to predict how the conservatives might react. The trend which emerged during 2002, of a split between moderate and hard-line conservatives, might well strengthen in 2003, but in order to have much impact it would need to be supported by a similar split within the ranks of the reformists. Then, the two moderate factions might ally and form a centrist government, which would try to reform the economy and certain institutions, without challenging however the clerical nature of the Iranian state. Towards the end of 2002, Supreme Leader Khamenei's intervention against the judiciary, which had passed the death sentence against Hashem Aghajari, appeared a sign that Khamenei himself could have taken the leadership of the moderate conservatives. Other moderate conservatives, such as Hassan Khomeini, the Ayatollah's grandson, and Ahmad Takoli, who had challenged Khatami in the 2001 elections, also condemned the death sentence, while the judiciary, a stronghold of hardliners, resisted their criticism. However, among the reformers there seem to be little appetite for a compromise, mainly because their support base opposes it. In 2003 some moderate reformists will continue to argue in favour of a compromise, for example by dropping the proposal that the President should acquire the power to prevent the execution of a sentence delivered by the judiciary. However, the large majority of reformers will oppose such deals, because their constituencies are in risk of switching over to the anti-system opposition. 
For 2003, therefore, political developments within Iran might take three different turns. The conservatives might refuse to concede any ground and, if faced with an increasingly militant opposition in the streets, stage a coup d'état. Some prominent conservative leaders, such as Khamenei himself and former president Rafsanjani, threatened openly the recourse to force already during the course of 2002.
It is also possible that the conservatives might succeed in attracting moderate reformers such as Khatami towards a compromise which stills increases his powers, although without weakening the capability of the conservatives to resist the reforms as much as most reformists desire. Khatami, a moderate himself, might find difficult to refuse such an offer. From the conservative point of view, the loss of power would be offset by a likely split in the reformist coalition and by the possibility of blaming future failures of the reforms on the newly enfranchised Khatami. The most likely outcome, however, is a new government headed by moderate conservatives and right-wing reformers, maybe strengthened through recourse to rigged elections.
Whether the reforms accelerate or not, political and social tensions are not going to die down in 2003. faster reforms will in any case mean more hardship for some sectors of the population. The latest estimate of the inflation rate in 2002/2003 was 15.3%, up four percentage points on the previous year due at least in part to the abolition of privileged currency exchange rates for some Iranian institutions, which was one of the reforms of the Khatami government. 
A compromise between moderates on both sides, however, would at least be likely to unblock the development of the oil industry. Iran will need to invest $30 billion over the next 8-9 years to maintain its share of world oil exports. The ageing Iranian fields have lost production capacity at the rate of 250,000 barrels per day, 6.4% of annual production. At least $1 billion are needed every year to maintain production at the current levels. To maintain the level of exports in the face of rising internal consumption and to increase them to satisfy the needs of a growing population, much more than that amount will be needed. 
In the strategy of the Khatami government, gas is supposed to make up for the shortcomings of the oil industry. Since Iran has huge reserves of gas, which at present are largely under-exploited, it would make good sense to move the focus of the investments in that direction. After the blow of the re-negotiation of the deal with Turkey, which could have cost Iran as much as 20% in discounts on the previously agreed price, Iran will be looking east, having identified China and most of all India as potential major markets of the future. 
Despite the improved economic performance of 2002/2003, it appears obvious that it will be difficult to achieve significantly higher growth rates without attracting massive foreign investment. The forecast of the Economist intelligence Unit for 2003/2004 is 5.3%, lower than in the current year, although still comparatively good. Even in this regard, a successful compromise among moderates could play an important role in reducing the opposition among conservatives against foreigners playing a much larger role in Iran's economy. Foreign businesses express a strong interest in the Iranian internal market, which at present is underdeveloped, due to restrictions to imports, which the government tries to maintain at around $15 billion, and to the inability of the domestic industries to meet demand. After achieving the first modest successes in attracting foreign investments in 2002, 2003 might well see an upsurge in such investments, for example in the car industry, whose annual sales of 300,000 are estimated to cover only half of potential demand. It is expected that in the foreseeable future most investments in the non-oil sector will come from Arab countries, but already some European companies are beginning to invest small sums. 

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Update 014 - (04/02/03)

Friend or foe?
The attitude of the Iranian establishment towards an American attack against Iraq remained ambiguous during January. Members of the Khatami government re-stated clearly their strong opposition to such a war, but the power to shape Iran's foreign policy rests with Supreme Leader Khamenei and his entourage composed of conservatives. Even the conservatives, however, were far from having reached unanimity on how to behave in the event of a war. Hard-liners are too hostile to the US to consider anything but complete opposition to whatever the Americans might do. Khamenei, a relatively moderate conservative, was reported to be ready to cooperate with the US, but only in exchange for substantial concessions, such as Iran's removal from the "axis of evil" and for the recognition of Iran's interests in Iraq. Former President Rafsanjani, a more pragmatic conservative, would appear to be ready to content himself with much less, such as a promise that the US will not attack Iran next. A final decision will likely not be reached until the war is ready to begin, but in the meanwhile the conservatives are united in the effort to remind the US that Iran has indeed some influence in the region. The Lebanese Hezbollah, for example, resumed their activity against Israel, probably encouraged by the Iranians, a development which caused a rift between Iran and its long-standing best Arab ally, Syria, which has by contrast adopted a more cautious approach.
The reformist government, on the other hand, continued to pursue an alternative foreign policy, aimed at reminding to the Americans and the world how friendly Islamic Iran can be instead. Apart from the row with the Syrians, which led to the cancellation of an official visit of Syrian President Al Asad, and which appears to have been rapidly settled anyway, the Khatami government reaped in January some benefits from its hard diplomatic work of the previous months. Important trade agreements were signed with India and Afghanistan, which are likely to greatly increase Iran's influence in the East. Westward, good news came from Kuwait, whose Minister for Foreign Affairs called for an expansion of ties between the two countries and for a security collaboration between Iran and the countries of the Gulf Cooperation Council. Moreover, Russia's decision not to abandon its ties (and profitable trade) with Iran appeared in all its importance in January, when the Bush administration dropped its objection to the building of a nuclear power station in Iran, with the clear aim of softening Russia's opposition to the war against Iraq. Even on the vexed question of the exploitation of the resources hidden under the Caspian Sea, some progress was reported during January in the negotiations with Azerbaijan. The Iranian Foreign Minister, Kharrazi, also continued his hard bargaining with the EU, asking for time in order to improve the situation of human rights in the country. The Iranian government could in January show at least an initial success in this regard, with the abolition of death penalty by stoning. The approval by the Iranian parliament of a law on personal freedoms at the beginning of the month was not seen as equally important, due to the possibility that the Council of Guardians might veto the new piece of legislation. During January, the Council of Guardians reminded everybody of its powers when it vetoed a law allowing Iranians to use satellite TV and another banning torture.

A confused internal political landscape
The internal political situation looked in January as fluid as the international one, although the end of the student demonstrations which had rocked Teheran in November and December led to a reduction of the tension. The conservatives appeared definitely split between supporters of a coup d'état, which would do away with the reformists once and for all, and more moderate elements who aim at replacing Khatami with one of theirs, pragmatic conservative like Hashem Rafsanjani or Mohsen Rezai. What appears certain is that Khatami's reform bills will not be approved by the Council of Guardians as they stand and they would have at least to be modified to an extent that would likely upset their nature. 
The reformists, on the other hand, are not united either. The dissolution of Teheran's city council in January highlighted the growing rift between the Islamic left factions and the right-wing reformists of the Executives of the Reconstruction group, which all support Khatami in the national parliament. Teheran is a very important reservoir of votes and controlling the city might be crucial to the outcome of the next general elections. Division exists also within the Islamic left between clerics, who tend to be more moderate and more supportive of Khatami, and secular members, who are increasingly becoming radicalised.

Will the positive economic trend last?
As the Iranian economy remains highly dependent on oil, the optimistic 2003/2004 budget began to be the subject of criticism shortly after being presented to the parliament. The assumption that oil revenues will maintain the level reached in 2002/2003 (around US$15 billion), when the Iraqi and the Venezuelan crises combined to push oil prices upwards, appears doubtful indeed. The government, however, has the option of drawing resources from its stabilisation fund, which is expected to stand at US$7 billion by the end of the current fiscal year (20 March) and which is meant to compensate the fluctuations of oil prices. As a result, the government confidently predicts GDP growth at 6% next year, which would confirm the performance of 2002/2003. The Economy and Finance Minister Mahazeri also predicts that Iran will finally be able to attract significant foreign direct investment next year, in the range of US$4 or 5 billion, as opposed to the less than US$500 million invested in 2002/2003. 
The government also expects the privatisation program to finally take off. Before the end of the current fiscal year (20 March), several state companies are expected to be floated on the stock exchange, as a prelude to privatisation. Banks in particular figure prominently in the list of state firms to be privatised. At present, there is just a single genuinely private bank in Iran and its network of branches is still very limited. There are, however, a number of obstacles towards a successful privatisation campaign. State banks are largely overstaffed, often have been operating at a loss for some time and are burdened by bad debts granted to state firms, the foundations and privileged individuals. 

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ENERGY

Iran enjoys excellent status in renewable energy sources 


Energy Minister, Habibollah Bitaraf, said on 27th January that the Islamic Republic of Iran possesses ample renewable energy sources and enjoys an excellent and high status among regional countries in this respect, IRNA reported.
Addressing a ceremony to launch the first domestically made wind turbine to generate electricity in Manjil, he said the country, which has diverse geographical conditions, benefits from new sources of energy including wind, hydroelectric and solar.
It is about seven years since the ministry has set out to attain new technological know-how to generate non-polluting energy sources which can be substituted for fossil energy, he said.
He predicted that the power generation capacity of the country's wind power plants can be increased from existing ten megawatts to sixty megawatts.
The first Iranian made wind turbine became operational in a special ceremony in Manjil on 27th January.
Managing Director of Iran's New Energy Organization, Yusef Armoudl,i said only four industrial countries as well as the Islamic Republic of Iran have access to technology required to manufacture wind turbine.

India And Iran Cooperation In Oil And Gas Sector 

India and Iran signed a memorandum of understanding on cooperation in hydrocarbon sector, Neftegaz.ru has reported. 
The MOU seeks to establish a framework for cooperation in specific areas of the hydrocarbon sector, ranging from exploration and production, supply of hydrocarbons - both oil and gas - and services sector. 
The cooperation will be based mostly on the exchange of information in a number of areas and commercial aspects like joint participation, imports of oil and gas and investment in Iran and India. 

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FOREIGN ECONOMIC RELATIONS

Iran to resume air link with Central Asia 

Minister of Road and Transportation, Ahmad Khorram, said recently that in discussions at the 7th Iran-Turkmenistan Economic Commission, "it was agreed to resume air links between Iran and Central Asia, including Turkmenistan," IRNA News Agency has reported 
He told IRNA that the scheduled plan calls for the inaugural light to commence in Tehran with stop-overs in Mashhad, Ashkhabad and Bishkek on February 16th. 
Previous Tehran-Mashhad-Ashkhabad flights were terminated in September due the losses by the air-carrier servicing the route. 
Khorram also said that another issue discussed in the commission meeting was the visa requirements for the citizens of the two nations. "Given the positive trend of the discussions it is expected that less visa formalities will be required in the future," Khorram remarked. 
He also said that with completion of 'Bajgiron' border terminal, to be constructed in the next six month, comprehensive facilities will be provided for expansion of trade, and tourism between the two countries. 
Meanwhile, Khorram said that Turkmen President Saparmurat Niyazov is resolutely determined to resolve the outstanding issues between Iran and Turkmenistan. 
Khorram, who is co-chairman of the 7th Iran-Turkmenistan Economic Commission, held talks with President Niyazov on ways to expand bilateral cooperation. He said that his talks with the Turkmen president focused on expansion of economic ties, transport cooperation and Iranian private sector participation in carrying out development project in Turkmenistan. 
Khorram said Iran and Turkmenistan are capable of cooperating in important projects in various fields, including Turkmenistan exports of gas and electricity to Iran, construction of 50,000-ton silos by Iran in Turkmenistan and cooperation in production of oil and gas derivatives and exports of technical and engineering services to Turkmenistan. 
Khorram referred to the claims of the Iranian private and public sector on Turkmenistan, adding Ashkhabad has agreed in speedy payment of all claims. 

India, Iran discuss modalities for execution of Science & Technology agreement 

India and Iran have discussed the methods for effective implementation of the programs envisaged in the recently-concluded agreement on cooperation in Science and Technology, says a press release of India's Press Information Bureau. 
The issue came up at a meeting between the visiting Iranian Minister for Science, Research and Technology, Dr. Mostafa Moin and India's Minister for Human Resource Development and Science & Technology, Dr. Murli Manohar Joshi. 
The two leaders describing the agreement as a landmark in Indo-Iranian relations decided to speedily set up the joint committee for smooth implementation of the accord. 
Realizing the potential of collaboration in biotechnology, Iran expressed keen interest in genetic engineering. Some of its scientists are to be trained in premier bio-tech institutions of India. 
Dr. Moin also sees India's help in Information Technology and said that Iran is planning to set up an IT university. 
Cooperation in Ocean development and earthquake studies also figured during the discussions. Dr. Joshi suggested that the two sides should also take up a joint study of Indo-Iranian history to understand the deep ancient cultural heritage. 
The agreement signed between Dr. Moin and Dr. Joshi in the presence of Iran's President Seyed Mohammad Khatami and Indian Premier Atal Bihari Vajpayee, envisages cooperation in information and communication technology, industrial technology, food technology, pharmaceutical research, energy, environment, medical and agricultural biotechnology, metallurgy, oil and petrochemicals and alternative sources of energy. 
The agreement is expected to go a long way in giving a boost to the tardy scientific collaboration between the two nations. 

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SHIPPING 

Iran to renovate shipping fleet to keep up with needs 

Minister of Industries and Mines Eshaq Jahangiri on Monday unveiled an ambitious project for renovation of national shipping fleet in line with market demand, saying proposals to the effect is expected to be submitted to the cabinet soon, IRNA reported.
Jahangiri, in an address to the fourth nationwide seminar on national maritime industries, highlighted the importance of the plan for modernization Iranian shipping industries to meet the growing demand for transportation and transit of foreign goods via Iran.
He also pointed to demands worth several million dollars for repair and renovation of oil tankers plying in the Hormuz Strait in the Persian Gulf as well as billions of dollars for shipping related services in projects for developing South Pars gas fields in Bushehr province in southern Iran.
The minister said that so far, contracts worth about two billion dollars have been signed with Iranian contractors for establishing marine structures and a 12-year long term loan with three percent interest rate is to be made available from Forex Reserve Fund for renovation of the shipping fleet.
The minister, however, declined to specify the amount of the loan.
He said his ministry is ready to conclude contracts with foreign contractors for renovation of national shipping fleet.
Jahangiri said there are 435 ships in Iran, almost half of them aged over 20 years, which should be discarded and replaced due to environmental concerns.
He said more than 5,600 loading and shipping vessels operate in southern ports. He added that the vessels need to be replaced by the 250-ton metal launches.

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