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Japan to resume new project lending to Iran--paper

TOKYO, June 30 (Reuters) - Japan will resume government loans to Iran for new projects for the first time in seven years, in a bid to improve ties with the oil-rich nation ahead of a visit by President Mohammad Khatami, a Japanese newspaper said on Friday.

The business daily Nihon Keizai Shimbun said the government later this year will lend Iran more than five billion yen ($47.55 million) for an anti-pollution project in Teheran.

Tokyo also plans to lend Iran 20 billion to 30 billion yen for a railway project near the Persian Gulf beginning in the next fiscal year, which starts in April 2001, the paper said.

A Foreign Ministry official declined to comment on the report, but said the ministry is preparing for a visit by Khatami before the end of the year.

In 1993, Japan followed the United States in tightening economic sanctions against Iran and suspended lending. The U.S. has placed Iran on its list of state sponsors of ``terrorism.''

Following the 1997 election of Khatami, a moderate, Japan resumed a dialogue with Teheran and lifted a six-year freeze on loans to Iran last year.

Last August, Tokyo agreed to lend 7.5 billion yen to help complete a hydroelectric dam on Iran's Karun river, a project which it had agreed to support in 1993, but it has yet to extend any loans for new projects.

The paper also said Tokyo was planning to provide trade insurance to Japanese companies building infrastructure projects in Iran and set up a joint committee with Teheran to discuss the safety of sea lanes to Japan.

Japan has a vital interest in the safety of ships travelling from Iran, its third-largest source of crude oil in the 1999/00 fiscal year.

The paper said Tokyo would condition the new lending on Iranian efforts to eliminate suspicions it is ``a terrorism-supporting nation.''

($1-105.15 Yen)


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