U.S. weighs pros and cons of Iranian grain deal
BY MICHAEL S. LELYVELD
Journal of Commerce
December 23, 1998
Despite its budget troubles, Iran plans to find financing for a $500
million grain purchase from the United States that would be the biggest
agricultural sale of the year, a principal in the proposed deal said this
week.
"They're coming up with the financing. From our perspective, it's
a cash deal," said Richard Bliss, a Washington attorney and president
of Niki Trading Co., a newly formed firm that is seeking a license to complete
the transaction with the Government Trading Corp. of Iran.
The planned sale has sparked intense interest since last week, when
32 House and Senate lawmakers from farm states wrote to President Clinton
urging him to grant permission in spite of U.S. sanctions.
The initiative led by Sen. Larry Craig, R-Idaho, is also endorsed by
eight agricultural lobbying groups including the National Association of
Wheat Growers. While backers say the license would be for a one-time sale,
they cite growing support for the view that food should not be barred to
countries that are subject to U.S. export bans.
Shipping companies are already vying to provide services for the huge
contract, which would include 2 million metric tons of wheat and over 1
million tons of other commodities.
Mr. Bliss said in an interview that he hopes the Treasury Department's
Office of Foreign Assets Control will reach a licensing decision within
the next few weeks before the opportunity passes and Iran turns to other
suppliers like Australia and Canada.
Weighing pros and cons
So far, the administration seems to be in the early stages of weighing
the pros and cons.
"It's certainly intriguing," a U.S. official said Tuesday.
On one side, there is the chance to benefit farmers, who have been simultaneously
blessed with a bumper crop and cursed with plunging commodity prices this
year.
The administration is sensitive to agriculture sector support and recently
went to the wall with Congress to win $6 billion in additional farm aid.
Agriculture exports were also key to cutting the nation's balance of trade
deficit to $14.2 billion in October, the best performance since April.
In addition, the sale could give the administration the opening it has
been seeking to improve relations with Iran. On the other side, there
is strong skepticism from officials who harbor hawkish views on Iran.
"Another theory could be that what the Iranians want to do is to
chip away at the sanctions regime, and any decision to allow such an export
would be such a chip," a second official said.
A decision could only come from the highest levels of the administration,
the official said.
But the timing of the reported buy order from Iran has interested officials,
who are concerned that the United States has been getting the cold shoulder
since June, when Secretary of State Madeleine Albright called for a "road
map" toward better relations in a ground-breaking speech.
All in the family
Mr. Bliss, a government affairs lawyer, said the telex from the Iranian
procurement agency came in August after contacts were made through the
father of his Iranian-born assistant. Such an order would only have come
after careful consideration by the Iranian government.
The request may be hard to verify independently. A spokesman for Iran's
Mission to the United Nations could not be reached for comment.
But aside from the support of the U.S. lawmakers, there are other arguments
for its credibility.
The choice of a U.S. supplier for a major contract is very similar to
Iran's previous attempt to engage Houston-based Conoco Inc. in a $1 billion
deal to develop its Sirri Island oil field.
Mr. Clinton barred the company's participation in March 1995 under pressure
from Sen. Alfonse D'Amato, R-N.Y.
Iranian officials have since said the Conoco deal was meant to signal
their willingness to move toward normalization with the United States.
Despite the election of moderate President Mohammed Khatami in May 1997,
the government has been constrained by hard-line opposition.
If the Niki Trading deal is a replay of the Conoco feeler, the administration
may find different conditions this time around.
Mr. D'Amato, who was defeated for re-election in November, will no longer
be a factor. The rise of the GOP-led farm lobby in opposing unilateral
sanctions also provides political cover that was unavailable in 1995.
Looking for help
The Iranians are also moving to dispel doubts about their finances.
Despite a loan default in September, debt rescheduling with Germany and
France is reportedly taking place. Foreign Minister Kamal Kharrazi was
in Japan Tuesday seeking similar help.
Iran's import needs may also be rising. The country's central bank reported
the prices of some staples rose by up to 23.9% in the week ending Dec.
11.
But U.S. hard-liners will argue that Iran is already eroding sanctions,
simply by raising prospects of a grain sale. Mr. Bliss brushed the argument
side.
"Gestures of good will like this have served the United States
well for many, many years," he said.
