IRANIAN-ARMENIAN CROSS BORDER TRADE AND ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 001055

SIPDIS

DEPT FOR EUR/CACEN, EUR/ACE, EB/ESC, NEA/ARP

E.O. 12958: DECL: 06/16/2015
TAGS: PREL ECON EPET AM IR RU
SUBJECT: IRANIAN-ARMENIAN CROSS BORDER TRADE AND ECONOMIC
RELATIONS

REF: BAKU 877

Classified By: DCM A.F. Godfrey for reasons 1.4 (b, d).

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SUMMARY
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1. (C) In a lead up to the Iranian presidential elections,
the government of Iran (GOI) has made some efforts to
increase trade with Armenia. This included hosting 60 owners
of small- to medium-sized Armenian businesses for a
conference in Tabriz, agreeing to open an Armenian consulate
in Tabriz, and promising to open up an Iranian business
center in Yerevan. Despite these steps, Armenian businessmen
and government officials do not foresee a significant
increase in cross-border trade, although Russian transhipment
through Armenia to Iran remains a concern. End Summary.

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IRANIAN BUSINESS CONFERENCE IN TABRIZ
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2. (C) Samvel Stepanovich and Samvel Hachikovich of the
Armenian Chamber of Commerce (ACC) told us that they and
approximately 60 owners of small- to medium-sized Armenian
businesses attended the Iranian business conference in Tabriz
on 1 June. They stated they went more out of curiosity than
with the intention of signing business contracts with Iranian
counterparts. They commented that the conference was well
organized and included field trips to various large Iranian
factories. The Armenian businessmen noted that the
conference appeared to be more of a vehicle for the GOI to
show off its factories than a forum for holding substantive
discussions about trade possibilities. The businessmen
explained that no joint ventures, investment or trade
agreements came out of the conference nor did they envision
any in the near future. A protocol of intentions was signed
identifying some possibilities for cooperation but the
Armenian businessmen dismissed it as symbolic and not
substantial. Both stated that almost all members of the ACC
preferred to conduct business with European and/or U.S.
companies. They explained that this would not change soon
unless they saw some significant changes in the business
practices by Iranian businessmen and/or the GOI. The ACC was
aware of the free trade zone established in Meghri, Armenia
but they had no immediate plans to take advantage of it.

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PLANNED ARMENIAN CONSULATE IN TABRIZ
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3. (C) Hasmik Dashtoyan, head of the Iran Department of the
Ministry of Foreign Affairs, confirmed that the GOI agreed
that Armenia could open a consulate in Tabriz in the autumn
of 2005. Dashtoyan also confirmed that the GOI was
interested in opening up an Iranian trade center in Yerevan
at roughly the same time. Despite an increase in the trade
turnover between the two countries during the four months of
2005 (vice the same period of 2004) to USD 30 million from
USD 24 million, Dashtoyan did not believe there was any
significant upswing in trade with Iran. Dashtoyan claimed,
however, that opening the consulate in Tabriz should help
increase some cross-border trade activities and trade in the
Tabriz region. Dashtoyan also explained that the new
consulate should help Iranian business travellers with visas
and could encourage new economic projects. Dashtoyan
believed that the opening of the consulate, coupled with a
proposed new highway to Iran, may help facilitate an increase
in overall trade but she did not foresee any new products
from Iran appearing on the Armenian market.


4. (C) Dashtoyan stated that she did not see any drop-off in
political activity between the two nations and stated that a
delegation consisting of members from the Iranian Ministry of
Education and Science and Iranian regional leaders was
scheduled to arrive shortly in Armenia to discuss student
exchanges and the mutual recognition of academic diplomas.
She explained to us that the Armenian Minister of Energy
Movsesian and his delegation just returned from Iran on June

13. She explained that Movsesian and his Iranian counterpart
discussed joint economic projects such as the
Armenian-Iranian gas pipeline (septel).

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RUSSIAN TRANSHIPMENT?
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5. (C) Former National Security Service Chief David
Shahnazarian alleged recently that Russian institutes
(specifically the Kurchatov Institute and "two secret
Siberian Institutes") had shipped material through Armenia to
Iran for use in Iran's weapons programs (reftel). He
believed, however, that no fissionable material was crossing
the border, but that the institutes were shipping technology
and expertise. Crossing the border from Iran and eventually
ending up in Russia, he claimed, were considerable amounts of
narcotics, especially heroin. (Note: Shahnazarian, while he
maintains the contacts that would give him continued access
to this kind of information, strongly opposes the current
government and has an interest in seeing it portrayed in a
negative light. End Note.)

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COMMENT
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6. (C) Despite the increase in the trade turnover figures for
the first four months of 2005, Iran is still in eighth place
in overall trade with Armenia, behind Great Britain and
Switzerland. Neither Dastoyan nor the businessmen from the
ACC felt that the possible opening of an Armenian consulate
in Tabriz, the opening of an Iranian business center in
Yerevan, or the hosting of business conferences in Iran would
have a significant affect on trade with Iran. Armenian
businessmen still prefer to work with their US and European
counterparts due to a stronger rule of law and more comfort
with European and US business practices. This coupled with
the Armenian public perception that Iranian imports are of
lesser quality than European and U.S. products will likely
keep Iranian trade figures from substantially increasing in
the near future.
EVANS