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U.S. Co. awaits approval to sell Iran $500Mln of grain

By Daniel Rosenberg
Dow Jones Commodities Service
June 15, 1999,

CHICAGO -- Richard Bliss has cleared the biggest hurdle in what once seemed a quixotic attempt to sell $500 million of U.S. grain to Iran , but several more challenges remain.

Late last year, Iran 's government trading agency contacted Bliss, president of Niki Trading Co., requesting 3.55 million metric tons of grain, sugar, rice and soybeans. At the time, U.S. sanctions prohibited sales of commodities to Tehran, but under pressure from farm groups and congressmen, U.S. President Bill Clinton agreed earlier this year to allow food and medicine sales.

Getting the sanctions policy changed required the heaviest lifting for Bliss and his supporters, but the policy change alone didn't lock in his deal.

The administration is writing a new list of rules regulating sales to Iran , and Bliss can't submit an application to the government until the rules are published. Even then, he won't be able to sell an ear of corn or a grain of rice until his application receives approval.

"We're still waiting for the administration to publish the rules, which I think will happen by the end of the month based on conversations I've had," Bliss said in a telephone interview. "We believe significant sales will occur soon after we receive permission."

A spokeswoman for the Treasury Department, which along with the State Department is formulating the rules, said approval by the end of June seems "overly optimistic," but couldn't provide more detail about the timeframe. A State Department official, however, said the rules "hopefully" will be published by the end of the month.

Bliss, whose company is based in Washington, hopes his application will receive quick approval. "We're hoping there won't be a lot of procedural steps to go through because business moves too fast," Bliss said.

Administration Working On Regulations For Iran Trade

Sen. Richard Lugar, an Indiana Republican, has urged the administration to release the new rules as soon as possible and to make them simple and nonbureaucratic, a spokesman said. The rules will regulate which commodities can be sold to Iran and which entities in Iran remain prohibited from doing business with the U.S.

Writing the rules isn't a simple process.

"Having medical supplies and equipment included complicates things," said Shahriar Afshar, president of the Iranian Trade Association, based in San Diego. "If you have medical equipment, you may have high-tech stuff including computers."

The administration wouldn't want to approve shipments of any materials that could potentially be used by Iran 's military, especially with the recent controversy over technology exports to China.

While he awaits the new rules, Bliss keeps in contact with grain companies, identifying available supplies. He declined to name the companies. Trade sources, however, say that Niki's main contact is a Japanese company - Marubeni Corp. (J.MRB) Niki reportedly has been in touch with Marubeni's office in the U.S., which would secure U.S. grain for the sale. A company official couldn't verify if Marubeni had been contacted by Niki.

When Iran requested the commodities last fall, the request reflected food needs at the time. In the months since, those needs changed and Niki's proposed sale to Iran will probably reflect that, Bliss said.

The biggest chunk of the sale likely will consist of 2 million metric tons of wheat. But the oilseed, rice, sugar and corn portions are unclear.

"This won't be one transaction, but a series, assuming a firm sale is made," Bliss said. "We wouldn't ship all that wheat and corn at one time. It would probably take between a year and 18 months to ship everything."

Afshar, of the Iranian Trade Organization, thinks Niki's deal "makes sense for Iran ," but added that price may be a significant factor in determining whether the sale goes through.

U.S. Stance On Ag Credits For Iran Remains Unclear

A drought that's trimmed Iran 's barley production could mean Tehran is more eager for U.S. grain than ever, Afshar said.

But money might be too tight to buy $500 million worth of grain at one time, Afshar said. He said Tehran might "do one half now, the other half later."

The U.S. hasn't made a definitive statement whether it will provide credit for sales to Iran . Chris Goldthwait, general sales manager for the U.S. Department of Agriculture, couldn't be reached for comment.

But last week, Goldthwait told Iowa consulting firm Professional Farmers of America that the USDA's GSM-102 agricultural credit guarantees could be used in sales to Iran , Libya and Sudan, the three countries affected by Clinton's order. Under the GSM program, the USDA backs loans from U.S. banks to foreign banks for purchase of U.S. commodities.

However, Undersecretary of State Stuart Eizenstat contradicted that in a speech last week, saying, "Let me emphasize: There will be no U.S. government funding, financing, guarantees or other support of these sales because we believe it would be inappropriate for these countries, in light of their continuing conduct, to benefit from such taxpayer-financed programs."

Eizenstat said the lifting of some sanctions against Iran does "not provide for the automatic approval of agricultural and medical sales. Instead, it shifts the presumption to favoring such sales. Contracts will have to pass through a policy filter."

U.S. Faces Strong Competition For Iranian Market

Iran represents about a $3 billion food market, Professional Farmers said on its Internet site. Two decades ago, with half its current population of 66 million, Iran was the biggest importer of U.S. rice. But the U.S. has prohibited most exports to Tehran since the 1979 revolution, accusing the government there of fomenting world terrorism.

In its attempt to resume some trading relations with Iran , the U.S. will face keen competition from exporters such as Australia and Argentina, which have continued selling commodities there during the long period of U.S. sanctions.

Once all the i's are dotted and t's are crossed, Niki Trading still doesn't have a lock on the deal, Bliss admitted.

"There will be others in the market, and it will be hotly competitive," Bliss said. "The last thing other exporters want is a new competitor in the market. But I'm extremely optimistic and very confident. We've come a long way on this road."

Afshar, of the Iranian Trade Association, thinks Niki has a good chance of seeing its deal go through.

"They have their application in before anyone else, and they're waiting on the edge of their chairs for a definitive rule," Afshar said. "Richard Bliss is very anxious to put the goods on board a ship and sail it himself if he has to."


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