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Iran puts brakes on implementation of contracts with Russia by setting new conditions

March 14, 15:31 UTC+3 TEHRAN
Iran is impeding implementation of contracts with Russia on construction of a thermal power plant in Bandar Abbas and railway electrification by setting new price conditions
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Russia's Energy Minister Alexander Novak

Russia's Energy Minister Alexander Novak

© Dmitry Astakhov/Russian Government Press Office/TASS

TEHRAN, March 14. /TASS/. Iran is impeding implementation of contracts with Russia on construction of a thermal power plant in Bandar Abbas and railway electrification by setting new price conditions, Russia’s Energy Minister and co-chairman of Russian-Iranian intergovernmental trade and economic cooperation commission Alexander Novak said on Monday at the meeting with his Iranian counterpart, Iran’s Minister of Communication and Information Technology Mahmud Vaezi.

"Projects need to be finalized instead of introducing new conditions, because it puts brakes on their implementation. Pricing is in line with the global level," the Russian minister said responding to the comment of his Iranian counterpart.

Vaezi said that the proposed contractual price was acceptable before the lifting of sanctions, and now it must be brought in line with world prices.

The agreements on the thermal power plant and the railroad were signed during the visit of Russian President Vladimir Putin to Iran in November 2015.

The first agreement provides for the construction of thermal power plants and desalination installations in the vicinity of the city of Bandar Abbas (Hormozgan province). It envisages the construction of the power plant comprising four units of 350 MW and a desalination plant capacity of 200,000 cubic meters per day.

The second agreement provides for electrification of the the Garmsar-Inche Burun railway section.

In February, in Moscow, Russia and Iran initialed documents for opening a $2.2 billion credit line for these two projects.

Joint production of buses in Iran

 Russian and Iranian companies are looking at joint production of buses in Iran.

"Russian automotive companies, such as Kamaz, Sollers and GAZ, are showing big interest in cooperation with Iran. A possibility of joint production of buses in Iran is being looked at," he said at a meeting with the Iranian co-chair of the commission, Minister of Communication and Information Technology Mahmud Vaezi.

Kamaz and Sollers have no bus manufacturing facilities whereas the GAZ Group incorporates four bus manufacturing plants, namely Likino Bus Plant (LiAZ), Pavlovo Bus Plant (PAZ), Kurgan Bus Plant (KAvZ) and Golitsyno Bus Plant (GolAZ). GAZ buses account for about 75% of the Russian market.

According to earlier reports citing material of the Russian Ministry of Industry and Trade, Kamaz, the GAZ Group and Sollers are in talks with Iranian partners. Thus, GAZ is negotiating possible organization of GAZ Next assembly and distribution in Iran and exports of car frames for four-wheel Ural vehicles to Iran’s army and civilian market.

Russia's free trade zone with Iran

According to the official, Russia is considering creation of a free trade zone with Iran.

"We’re studying the issue of introducing a free trade zone with Iran," Novak said when speaking about common issues and problems related to bilateral trade and economic relations between Tehran and Moscow.

"As far as free trade is concerned I can say that on February 2, a joint research group submitted the first draft report to the Iranian side for consideration," Novak said.

"I have to note that the level of our current economic relations is in line with political ties. In general our ties with Iran have become more intense," he said, adding that metal products and chemicals are potential export items to Iran from Russia.

"We want to compare notes regarding the main areas of cooperation before the upcoming meeting of the intergovernmental commission. In fact, the preparations are over. Many representatives of Russian ministries and departments have visited Tehran. The meeting of representatives of our countries’ central banks was particularly fruitful," Novak said.

The next meeting of the intergovernmental commission will take place in Tehran this year.

Novak also noted that Russia and Iran endeavor to normalize relations between banks of both countries.

"The return to normal relations between banks of Russia and Iran is currently one of main tasks in expanding bilateral trade and economic ties," the Russian minister said.

The parties noted a series of positive talks undertaken by Moscow and Tehran to normalize interbank cooperation in the course of negotiations.

Russia and Iran are also discussing opportunities for interaction of payment systems and broader use of national currencies in bilateral settlements.

Iran may supply fruit and vegetables to Russia amounting to $1 bln yearly

According to the official, Iran may supply fruit and vegetables to Russia amounting to at least $1 bln per year.

"We intend to boost food supplies from Iran. The market Iran may well capture after termination of fruit and vegetables supplies from Turkey amounts to at least $1 bln yearly," the Russian minister said.

Novak also urged the Iranian side to develop mutual foreign trade supplies of agricultural products over the Caspian Sea. "We should develop the corridor across the Caspian Sea for bilateral supplies," the Russian minister said.

The Russian side considered decisions on reduction of customs duties on import of pistachios, dates, raisins, and certain other goods, Novak said. The issue is currently reviewed by competent authorities in Russia, he added.

According to data of the Russian Federal Customs Service, Russia exported agricultural products worth $484.4 mln to Iran in 2015. Main commodity positions of the agricultural export are crops, particularly wheat and barley, and sunflower oil.

In its turn, Russia’s agricultural import from Iran totaled $194.3 mln. Russia mainly imported vegetables, fruit, dried fruit, and nuts.

Gazprom Neft presents concrete proposals in developing oil fields in Iran

The minister also pointed out that Russia's Gazprom Neft has presented concrete proposals in developing oil fields in Iran.

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