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Cablegate: Iran's Commercial Interests in Zambia

VZCZCXRO8574
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0139/01 0350850
ZNR UUUUU ZZH
R 040850Z FEB 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 5420
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHINGTON DC
RHEBAAA/DOE WASHDC

UNCLAS SECTION 01 OF 02 LUSAKA 000139

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/S, NEA/IR, INR/AA, INR/NESA, EEB/ESC
COMMERCE FOR 4510/ITA/ANESA/OA

E.O. 12958: N/A
TAGS: ECON EPET ETRD EINV PREL IR ZA
SUBJECT: IRAN'S COMMERCIAL INTERESTS IN ZAMBIA

REF: LUSAKA 44

1. (U) This cable is Sensitive But Unclassified. Please
protect accordingly.

2. (SBU) Summary. Although Iran does not maintain an
official diplomatic presence in Lusaka, Iranian companies
show a modest level of commercial interest in Zambia.
Imports of Iranian oil may increase over time, as may Zambian
exports of tobacco. Although overall trade figures are
small, the amount of commercial activity may be rising.
Export data suggest that Iran views Zambia as a viable export
market, but trade has generally been ad hoc and small scale.
Accurate data may be difficult to capture, as some of the
trade is transacted through third parties. The GRZ has made
a deliberate effort to ensure that its commercial
relationship with Iran does not cross over political lines.
End Summary.

--------------------------------
Modest (yet persistent) Commerce
--------------------------------

3. (SBU) Despite the absence of an Embassy or an official
presence in Zambia, Iranian companies show a modest level of
interest in Zambia. P/E Officer obtained the following
statistics from the Common Market for Eastern and Southern
Africa (COMESA) regarding Zambian trade with Iran between
1997-2006. Figures are in USD.

Exports Imports
Year to Iran from Iran
---- ------- ---------
1997 0 7,297,988
1998 0 208,408
1999 7,408 161,500
2000 2,933 495,243
2001 9,154 1,718,421
2002 0 538,453
2003 1,061,039 352,572
2004 0 597,733
2005 278,448 310,882
2006 0 1,506,054

4. (SBU) Zambia's exports to Iran consist almost entirely of
tobacco. Given the tobacco industry's growth in Zambia, it
is possible that tobacco exports will increase. Iranian
imports are comprised primarily of petroleum, chemicals,
tractors, office and data processing machinery, tools, and
furniture/furnishing items. A private sector contact
suggested to P/E Officer that Iranian entrepreneurs and
traders residing in Zambia drive a majority of the commerce,
which consists primarily of small-scale transactions. (Note:
Although the nominal value of trade is low, the data show an
increase in the range of products being traded, pointing to a
broadening--though not necessarily deepening--level of
commercial activity. End Note.) Iran participates in
Zambia's annual trade shows, where its textiles and carpets
have enjoyed popular appeal. As a share of total trade,
imports from Iran represent less than one percent of total
Zambian imports in 2006, and Zambian exports to Iran are
negligible. Zambia's bilateral trade with Iran is relatively
consistent with overall COMESA-wide trend, which shows a
slight increase in trade with Iran over the same period.

----------------------
Business, Not Politics
----------------------

5. (SBU) The GRZ has made a deliberate effort to ensure that
its commercial relationship with Iran does not cross over
political lines. In 2003, a high-level delegation visiting
from Iran indicated an interest and capability in a
public-private partnership to construct hydro-electric power
plant. The discussions resulted in a deal between FARAB, an
Iranian energy company, and Zambia's parastatal electricity
provider ZESCO for the development of a 120 MW plant at
Itezhi-Tezhi valued at USD 150 million. In the following
years, however, Iran pressured the GRZ to side with it on
sensitive issues in the United Nations. According to Embassy
contacts at ZESCO, the GRZ decided to pull out of the
deal--when the project was at the pre-design stage and
discussions on financing were already underway--so the
Iranians would not use the project for political leverage.
In 2006, the GRZ awarded the Itezhi-Tezhi deal to TATA, an
Indian company.

LUSAKA 00000139 002 OF 002

-------------------------------
Trade in Petroleum May Increase
-------------------------------

6. (SBU) Recent developments suggest that trade in petroleum
products may increase in the period ahead. In October 2007,
Indeni Oil Refinery (which is a joint venture between the GRZ
and the French oil company Total) agreed to purchase 60,000
tons of crude oil valued at USD 45 million through Gallic
Oil, an agent of Litasco of Switzerland. Citibank declined
to finance the transaction when it learned that the
transaction involved Iranian oil. The transaction later went
through when Finance Bank (a local commercial bank) provided
financing.

7. (SBU) Following the October transaction, the GRZ announced
its decision to turn over the responsibility for managing the
nation's crude oil supply to Indeni Oil Refinery. In
November 2007, the GRZ solicited tenders to supply Indeni
Refinery with USD 1.4 million tons of crude oil over a
two-year period. On January 5, the GRZ awarded the contract
to the Independent Petroleum Group, a Kuwaiti firm. Although
the GRZ has not published the tenders, the Zambia National
Tender Board announced in late November that the proposal
with the lowest oil price included crude oil from Iran.

8. (SBU) Comment. If Independent Petroleum purchases its oil
from Iran, the GRZ is unlikely to feel beholden to Iran given
its sensible decision to distance itself from the petroleum
transactions. The GRZ's reaction to pressure during the
Itezhi-Tezhi negotiations is also encouraging.
MARTINEZ

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