Iran and Iraq signed a memorandum of understanding on Sunday, aiming to open $1 billion credit line that could boost the flow of Iran's exports to its neighbour, the Commerce Ministry said. Iraqi Prime Minister Ibrahim Jafaari, the first Iraqi leader to visit Tehran in decades, arrived in the country on Saturday, heading a large delegation to improve ties between the former foes, despite Washington's reservations.
"The credit will be used for the export of technical and engineering services, as well as other goods to Iraq," an Iranian Commerce Ministry spokesman said.
Iran's Export Guarantee Fund will pay Iranian exporters for their exports to Iraq and get the money back later from Trade Bank of Iraq, with one percent interest.
The value of trade between the two countries stood at $700 million in the year to March 2005.
Iran has agreed to send about 200,000 tonnes of flour to Iraq and will guarantee letters of credit issued by an Iraqi bank to a total of $300 million.
Iran and Iraq fought each other to a stalemate in the 1980s in a conflict that killed hundreds of thousands on both sides of the border.
sugar import
Iran will import sugar in the year to March 2006, if needed, Commerce Minister Mohammad Shariatmadari said late on Saturday, backtracking from earlier comments that the government had decided not to buy from abroad.
"The policy for sugar and rice is to first buy local, but we will also import if necessary," Shariatmadari told Reuters when asked if the country would import sugar in the year to March 2006.
Iranian state television earlier this year quoted Deputy Commerce Minister Mojtaba Ansari saying the government had directed that imports be halted in the period.
Iran produced 1.4 million tonnes of sugar in the year to March 2005. Domestic consumption in the same period stood at 1.8 million tonnes.
Despite shortages in production, Iran's sugar factories said they had the 400,000 tonnes needed to fill last year's gap piled up in their stores from the previous year and urged the government to stop imports.
Having sold their stocks to the government, the factories now say they do not have stored sugar for the year to March 2006.
"We don't foresee any stocks in our factories this year, and sales will be good," Sugarcane Development Company Managing Director Mehdi Mofidi was quoted as saying by Iran's Sugar Monthly magazine.
Iran commissioned a new plant, Salman Farsi Sugar Factory, in the south-western province of Khuzestan last month, adding 100,000 tonnes to its production capacity.
Iran's Government Trading Company (GTC), which is in charge of state imports of key goods, this year tendered for 30,000 tonnes of Brazilian raw cane sugar, but later cancelled the purchase after what it said were changes made to its purchasing procedures.
The GTC declined to comment about sugar imports and changes to its tender procedures.
Iran's domestic sugar is twice as expensive as imports, but the government said it was ready to buy locally to support the sugar industry if funds were allocated for this purpose.
Iran's ministry of agriculture has drafted a 10-year plan to increase sugar production to 2.3 million tonnes a year by 2015.