Iran’s Axis of Investment: Mixed Results

Courtesy of The Wall Street Journal, an interesting review of Iran’s trade agreements with African and Central & Latin American countries.  As the article notes, success has been mixed to date:

“…a close, on-site examination of some of Iran’s projects on two continents — in Nicaragua, Venezuela and Senegal — reveals mixed results.

Some efforts, like the one at Monkey Point, which was announced by Nicaraguan President Daniel Ortega more than two years ago, so far haven’t materialized. “The Iranians have promised a lot but have delivered very little,” said a Western official in Nicaragua.

Other investments sometimes seem to make little economic sense. For example, Iran Khodro, a state-owned Iranian auto maker that spent tens of millions of dollars opening factories in Venezuela and Senegal, recently required a $1.4 billion Iranian-government bailout.

The Senegalese plant, SenIran Auto, produced only 20 cars in its first three months of this year, plant officials there say, well short of the thousands they had been expecting to produce by then.

…Some experts believe Iran mainly wants to build a global coalition of anti-American nations to support its interests at the United Nations. A diplomatic source in Caracas suggested trade was another motive. “You can’t necessarily assume that everything that happens here has a terrorism-related purpose. The Iranians definitely have an incentive to make money.”

Alireza Salari, Iran’s deputy foreign minister for Americas affairs, said in an interview that the point of its foreign policy is to show “it does not need the United States to survive.”

“Iran’s international prestige today is higher than ever,” he said. “Everywhere you go in the world they recognize Iran’s name, they know our president’s name.”

Distrust over Iran’s intentions can be seen in Venezuela, an oil producer with an inflation-ravaged economy. Mr. Chávez, who visited Tehran this month, has embraced Mr. Ahmadinejad. Iran has financed a variety of Venezuelan development projects making everything from tractors to dairy products, government officials say.

There’s a weekly flight from Tehran to Caracas. The number of Iranians living in the Venezuelan capital has swelled to about 2,000 from under 200 since the flights began two years ago, says an Iranian businessman.

The Venezuelan Embassy in Washington, D.C., said it couldn’t confirm the numbers.

Mr. Chávez’s critics claim the Iranian factories may have darker purposes. The plants include Fanabi, a joint Iranian-Venezuelan bicycle factory in Tinaquillo, about a three-hour drive from Caracas.

Mr. Morgenthau referred to factories like this in his recent speech. Given their placement in “remote” areas and their “secretive nature,” he said, “we should be concerned that illegal activity might be taking place.” However, he said, evidence is “limited.”

Although there are suspicions in diplomatic and other circles about the real purposes of some of the Iranian-financed factories and projects, so far there is no hard evidence that they are anything other than what they claim to be.

Ambassador Herrera responded in his letter to Mr. Morgenthau: “What you refer to in your speech as ‘suspicious factories’ are providing Venezuelans with food, transportation and agricultural equipment,” as well as bikes and consumer goods.

During a reporter’s unannounced visit this month to the bicycle facility — a bright red-and-beige building in an industrial park — the plant’s president, José Aranguren, a Venezuelan, agreed to provide a tour and permit photos to be taken. The plant’s Iranian vice president, Reza Dai, declined to be interviewed.

Mr. Aranguren noted that when the bike plant opened last year, local opposition newspapers reported that it “exists to enrich uranium” and “we were building bombs.” He called the allegations “total lies.”

To poke fun at the claims, Mr. Chávez, who visited the plant when it opened, suggested a brand name now used on all bike models: Atomic.

Iris Cano, a Venezuelan in charge of sales, opened spreadsheets on her computer showing that the factory last year sold out its entire initial production run of 4,860 bicycles.

The company employs 44 workers and offers at least eight bike models, she said, including for women, children and one with a large rear basket designed for deliveries. The bikes are made from Iranian parts and are 50% subsidized by the Venezuelan government. Mr. Aranguren calls it “a socialist enterprise.”

The bike factory has hit a serious obstacle this year. Iran has failed to deliver many needed parts, and production has dropped 90%, plant officials say. Iran has promised to deliver enough parts to assemble an additional 25,000 bikes, Mr. Aranguren says, but has mainly delivered cartons of frames, wheels and handlebars, which are stored in a warehouse down the street.

“We’re a bit paralyzed because we don’t have all of our raw materials from Iran,” he says.

In the financial district of Caracas, the Iranian-owned Banco Internacional de Desarrollo, or BID, has its own problems. The U.S. Treasury Department last year imposed sanctions against the bank and its parent, the Export Development Bank of Iran, which it accused of violating U.N. sanctions by helping Iran procure weapons of mass destruction. As a result, BID isn’t allowed to do business with the U.S. banking system.

BID’s clients include Iranian factories such as Fanabi and an Iranian company that builds housing, bank officials say. According to a sign, it offers checking and savings accounts, loans and trade finance.

Inside the bank, employees complain the sanctions mean they can’t offer credit or debit cards to its 200 customers. “I can’t have a relationship with Maestro, Visa or American Express,” says Raymundo Velasquez, the branch manager. “It’s terrible. According to them, this bank finances terrorists.”

Mr. Velasquez was standing in the gleaming branch office, which had tellers and a security guard, but no customers. Upstairs, in a back office, employees entered data into computers. The 21 employees include five Iranians. The bank’s Iranian president declined to be interviewed.

José Antonio Gonzalez, the bank’s legal representative, said the purpose of the bank, which opened last year, is “to help all the [Iranian development] projects.” Iran “came here to help in many ways, but not militarily,” he said. Fernando Illarmendi, the only Venezuelan on BID’s board of directors, said he wouldn’t work at the bank if it was connected in any way to weapons.

Mr. Morgenthau, the Manhattan district attorney, had suggested in his speech that BID’s purpose was to violate U.S. sanctions by establishing relationships with foreign banks that do business with U.S. banks. Mr. Gonzalez said BID has no such relationships with foreign banks, and does no international transactions.

In Senegal, a Muslim country on the western coast of Africa, Iran installed electric lines last year to power the town of Touba, a holy city that attracts hundreds of thousands of Muslim pilgrims each year. But Iran’s most visible impact here: the arrival of shiny, new, Iranian-made yellow taxis. They stand in stark contrast to the city’s aging fleet of rickety vehicles with dented doors and broken lights.

“Everyone now knows Iran because of the cabs. We go to a remote village, and children run after our car shouting ‘Iranian car, Iranian car,'” says 53-year-old Modou Sogk, chairman of the taxi-driver association, who owns an Iranian cab and hopes to buy a second one.

Still, Iran has fallen behind on its promise to help phase out Dakar’s 25,000 cabs. Senegal and Iran had an agreement to replace 2,000 taxis by the end of last year, but so far only about 500 have been delivered.

Many other planned ventures, including a storage facility for Iranian oil, haven’t materialized. The project is currently suspended due to high costs, according to Mamadou Diop, Senegal’s minister of commerce.

Meanwhile, an Iranian-built $75 million auto plant in Thies, which opened last year, produced only 20 cars in this year’s first quarter when the goal was to produce 80% of the targeted annual output of 10,000 cars by middle of this year, plant managers say. Managers say they suffered from delays in opening the factory, a lack of spare parts and a shortage of skilled workers in Senegal.

Even if production increases, “the project has no economic return, and maybe it never will,” says Hassan Davoudi Deilami, the plant’s financial manager. He says the factory’s purpose is simply to give Iran a presence in Africa.

Iran is producing more cars in Venezuela. A Venezuelan official at the factory says the plant, called Venirauto, currently makes six cars an hour. Customers drove off with two of the small sedans, the upholstery still covered in plastic, when a reporter showed up earlier this month.

Despite an overall shortage of new cars in Venezuela, the Iranian cars are available only to government ministries, the official said. He described the factory as a “social” program not intended to make a profit.

One man, standing outside a security office at the factory gate, said he had traveled eight hours on a bus hoping to buy one of the cars. He said he was convinced the only way was “knowing somebody or bribing someone.” A few minutes later, a security official told him none were for sale to the general public.

Unlike Venezuela and Senegal, Nicaragua so far appears to be mostly a case of unfulfilled promises. Despite a host of projects announced by the Iranian and Nicaraguan governments — their presidents have exchanged visits — “this so-called relationship has given nothing close to the expectations” for Nicaragua, says Felix Maradiaga, a political-science professor at Nicaragua’s American University who has monitored the proposed projects.

Mr. Maradiaga tracked more than two dozen projects publicly discussed in 2007 and 2008 by either Nicaragua’s President Ortega or Iranian officials, including several power plants, a giant housing project for the poor, and milk-processing plants. The announced projects totaled about $1 billion in investments, he says.

To date, he says, the only project under way is a $1.5 million hospital. Construction began this month.

Officials in Nicaragua’s Foreign Ministry declined to answer questions for this article.

Back at Monkey Point — part of an English-speaking, autonomous region along Nicaragua’s Atlantic Coast — the residents are still puzzled over the delegation that arrived by boat in March 2008.

“They said they were told this was just jungle,” says Allen Clair, vice president of Monkey Point’s communal government. He says about 160 residents made it clear to the foreigners that this was their land. “Everybody was yelling at the people.”

Mr. Clair says the residents were tipped off about the visit by a local journalist and arranged to videotape it. In the film, a man who identifies himself as “a representative of Iran” says, “Our goal in coming here is to attract Iranian investors and entrepreneurs with the goal of helping the supportive, resilient and long-suffering people of Nicaragua.”

Local officials say they aren’t against development or Iranians, but want to be consulted on any development projects. But the matter may be moot.

“That was the last time we saw them,” says Pearl Watson, the communal government’s president.”

This entry was posted on Monday, September 28th, 2009 at 9:17 am and is filed under Iraq.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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