U.S.-Iran Trade Going Up

A miniboom in Iran's oil exports is setting the stage for a possible substantial expansion of U.S. exports to that country.

Already, U.S. manufacturers have been selling twice as much to Iran—including consumer goods and spare parts for Iran's deteriorating industrial plants—as last year: $109.3 million from January to July, compared to $65.9 million during 1982's corresponding period. But trade analysts in the U.S. Department of Commerce concede that third country transfers are not reflected in their export figures, and that trade is actually much larger. While the U.S. government—under the 1981 Algiers agreement liberating U.S. hostages—has lifted all trade sanctions against Iran, Iran still prefers dealing with the U.S. through European brokers or other third country trade representatives.

U.S. businesses report that third party inquiries for U.S. goods, including oil equipment, have picked up in recent weeks. More have followed the recent spate of claims settlements made by Iran with 20 U.S. banks. The latest settlement was in August, to the U.S. Export-Import Bank for $419.5 million—the largest since the $136 million payment to Manufacturers Hanover Trust Company in July. Other U.S. banks whose claims have been settled include Chase Manhattan, Citibank, Marine Midland, Wells Fargo and American Security Bank, Washington, D.C. So far Iran has paid out $859.9 million from the $1.418 billion escrow fund set up with the Bank of England after the Algiers agreement. Claims by another 20 banks are expected by financial observers to be settled by the end of 1984. Another $70 million has been paid out from a separate $1 billion account for corporate and individual claims. Altogether there are 550 claims for more than $250,000 each, of which 60 have been settled so far. Some of the claims are still disputed by Iran and may never be settled.

If further U.S. trade develops it can go on even if there are no U.S.-Iran diplomatic links. Britain, whose exports to Iran are much larger than those of the U.S., has none. The first giant step for U.S. business would be to resume some of the projects abandoned during the 1979 Khomeini revolution. A test case now being keenly observed by Western businessmen is the $4 billion Bandar Khomeini petrochemical complex, a 50-50 venture between Japan's Mitsui and Co. and Iran's National Petro-chemical Co. After initial disagreements, a final accord has been reached to cover additional costs arising out of damage done by Iraqi bombs. Mitsui has already sunk $1.4 billion into the complex, which was 85 percent completed in 1979. The project headquarters office is expected to open in Tehran this fall. If the Japanese can go ahead and complete the complex without further hassles, the U.S. and other Western countries could be encouraged to do the same with their abandoned projects.

Another area where U.S. technology might be in special demand is oil development and the repair of terminals destroyed in the war. Iran's National Drilling Co. claims to have struck oil in the southwest near the Iraqi border, while the National Iranian Oil Co. is interested in expanding its offshore production to areas safe from Iraqi bombers.

The money for Iran's growing purchases comes from an average of two million barrels of oil a day which, despite the unending conflict with Iraq, it has been exporting over the past year at attractively discounted prices (for a large part of this period, Iran was violating OPEC production quota and pricing agreements). Among Iran's big customers has been the U.S., which imported $540.5 million worth of oil in 1982, compared to none in 1981. During the first half of 1983, U.S. oil imports were $265.9 million, compared to #136.7 million for the equivalent period of 1982.

The increased flows of oil revenues have helped raise Iran's foreign exchange reserves from $3 billion in 1982 to $8-10 billion in mid-1983, according to Iranian officials. They say that the recovery of some of the Shah's assets from abroad has added to the nest-egg.