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UNCLAS SECTION 01 OF 03 CARACAS 003345 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV PREL EFIN VE IR
SUBJECT: THE VENEZUELA-IRAN ECONOMIC RELATIONSHIP 
 
REF: A. CARACAS 958 
     ¶B. CARACAS 3257 
     ¶C. CARACAS 3082 
 
CARACAS 00003345  001.2 OF 003 
 
 
This cable is sensitive but unclassified, please treat 
accordingly. 
 
------- 
Summary 
------- 
 
¶1. (SBU)  In the last two years, Venezuela and Iran have 
signed at least 61 agreements, respective presidents have 
visited each other at least four times, and trade between 
both countries has increased exponentially in percentage 
terms.  However, the number of joint ventures in operation on 
the ground is minimal, and bilateral trade as a percentage of 
each country's overall trade is very small.  Based on 
available information, the only fully-operational joint 
venture is the VenIran tractor plant, which uses old 
technology and has low production levels.  The Iranian 
population in Venezuela is relatively small compared to other 
muslim immigrant groups, but a recent memorandum of 
understanding between Iran Air and state-owned Conviasa 
Airlines may suggest both sides anticipate more two-way 
travel.  The economic coziness has political motives, as in 
the end, the main link between Chavez and Ahmadinejad is a 
common hatred of the United States.  End Summary. 
 
--------------- 
Bilateral Trade 
--------------- 
 
¶2. (SBU)  Bilateral trade between Venezuela and Iran has 
grown dramatically in the last two years, but still doesn't 
amount to much.  SENIAT, the BRV's customs and tax agency, 
reported that from January to June 2006, Venezuela imported 
over USD 17 million worth of Iranian goods, largely vehicles 
and automotive parts, representing a 67 percent increase from 
¶2005.  This only represents 0.13 percent of Venezuela's 
overall imports.  Conversely, Venezuela's exports to Iran for 
that same period accounted for merely USD 7 million, nearly 
all iron and steel products.  Although this is a 2,800 
percent increase from Venezuelan exports to Iran in 2005, it 
still represents only 0.1 percent of Iran's total imports. 
 
------------------------------ 
Agreements and more agreements 
------------------------------ 
 
¶3. (SBU) Over the last two years, Iranian presidents (Khatami 
and Ahmadienjad) and President Chavez have visited each other 
at least four times.  These meetings have resulted in 61 
agreements in oil and gas, agriculture, aviation, defense, 
education, finance, health, housing, industry, 
infrastructure, media, mining, trade and tourism.  Of these, 
only 10 call for the creation of joint ventures, the rest are 
memoranda of understanding (MOU), signed agreements, or 
letters of intent. 
 
¶4. (SBU)  Some examples of the agreements include: a joint 
venture between PDVSA and Petropars for oil exploration in 
the Orinoco Ayacucho block; construction of ammonia, 
fertilizer, methanol and polyethylene plants by Pequiven, the 
BRV's petrochemical company, and the Iranian company Sadra; 
a joint venture manufacturing assembly plant for dairy 
products, tomato sauce, and marmalade; student and teacher 
exchange programs between the Bolivarian University of 
 
CARACAS 00003345  002.2 OF 003 
 
 
Venezuela (UBV) and Iran's Free Islamic University;  a 
feasibility study for a joint shipbuilding operation; and 
financial agreements between Venezuela's Industrial Bank and 
Iran's Export Development Bank.  (Note: A complete listing of 
the agreements is available on the Embassy Caracas Classified 
Intranet, under "Chavez' Dollar Diplomacy," (Ref B).  End 
Note). 
 
---------------------- 
Projects on the ground 
---------------------- 
 
¶5. (SBU) Despite the large number of agreements, only a 
handful of projects are actually operating on Venezuelan 
soil.  In Monagas State, the BRV reportedly began 
construction of the Cerro Azul cement plant in January 2006, 
and the company's president declared at the time that it 
would be operational by 2009.  In June 2006, the BRV also 
invested in a joint-venture automotive assembly plant, called 
VenInsa, with Iranian company Aidco.  It is set to begin 
operating fully in 2011, though an Iranian official told the 
media it would be as early as 2007.  Other press reports have 
surfaced about an Iranian bicycle factory in Bolivar State, 
but information on whether it is even operational is 
unavailable. 
 
¶6. (SBU) The only confirmed project that is currently 
operational is the VenIran tractor assembly plant 
(inaugurated March 2005 in Bolivar state), touting a 
production capacity of 14 completed tractors a day and three 
tractor models.  The plant has approximately 70 employees, 
mostly Venezuelans with Iranian management.  The owner of a 
large tractor import business in Venezuela visited the plant 
and said he'd be surprised if it turned out more than two 
tractors a week.  The president of an agricultural chamber 
group said the factory produced only one type of tractor, and 
was importing finished tractors to make up the difference. 
Both noted the plant was using 30-year old technology with 
mainly Iranian parts, and did not anticipate much market 
demand due to lack of post-sale maintenance services.  The 
tractors are purchased by the government and sold to rural 
cooperatives that are beneficiaries of BRV land reforms.  The 
company's president claimed in October 2006 that they were 
filling orders from Bolivia, Uruguay, Paraguay, Honduras, 
Trinidad and Cuba.  VenIran plans to also assemble planters 
and combines. 
 
¶7. (SBU) Other Iranian companies have also attempted to enter 
the Venezuelan market on their own, instead of under the 
wings of bilateral agreements.  In early 2006, over 40 
companies participated in an Iran-Venezuela Industrial Fair, 
and in September 2006, the BRV-sponsored Caracas Tourism Fair 
(FITCAR) hosted an Iranian booth in its international wing. 
The booth showcased Iranian tourist destinations, sold 
handicrafts, and an Air Iran representative was on hand to 
promote the company.  (Note: the Iranian promotional signs 
were all in English.  End Note). 
 
---------------------- 
The Iranian community 
---------------------- 
 
¶8.  (SBU) Though we don't know the exact numbers, the Iranian 
community in Venezuela is relatively small compared to other 
middle eastern immigrant groups, such as Lebanese and Syrian 
(about 250,000 total, Ref A).  They are spread around a 
variety of sectors -- from a handful of Persian restaurants 
and rug dealerships, to oil, gas, and industry.  There are 
 
CARACAS 00003345  003.2 OF 003 
 
 
some hints of cultural linkage, such as a statue of 
Venezuelan national hero Simon Bolivar in Teheran and one of 
Omar Khayyam in Caracas, or an Iran-Venezuela joint postage 
stamp album that came out in 2005.  However, the linkage 
seems to be top-down, based on official visits and BRV 
agreements rather than as a signal of a large, active 
Iranian-Venezuelan population. 
 
¶9. (SBU) Given the many upcoming bilateral projects, the 
number of Iranians in Venezuela could grow.  The presumption 
may have been the motivation for a recent MOU between Iran 
Air and BRV-owned Conviasa Airlines for a code-share to 
operate Caracas-Teheran flights.  However, Venezuelan civil 
aviation authorities stated in October 2006 that they had not 
received an official request to approve the route and the 
companies had not started any proceedings to begin operating 
flights (Ref C).  This, in turn, may hint that the agreement 
was just a political statement. 
 
---------------------------------- 
The enemy of my enemy is my friend 
---------------------------------- 
 
¶10. (SBU) The strongest link between Chavez and Ahmadinejad 
seems to be the common ideological hatred of the United 
States.  William Lara, the BRV's Information Minister, said 
that "despite our geographic and cultural differences, we 
coincide in resisting against the audacity of the hawks, led 
by George Bush, who wish to oppress all the peoples of the 
world."  The BRV continually highlights the similarities 
between the two countries, such as oil production (both are 
price hawks in OPEC), and a strong cooperative tradition. 
Official media, however, is careful to emphasize what 
Venezuela gains from deals with Iran (technology transfer and 
a world ally). 
 
------- 
Comment 
------- 
 
¶11. (SBU)  For now, the linkage between Iran and Venezuela is 
more about intentions than actual on-the-ground cooperation. 
The number of functioning projects is minimal, and the 
efficiency of at least one of these (VenIran tractor factory) 
is questionable.  If the BRV brings bilateral agreements to 
fruition, more Iranians could be on their way to Venezuela. 
Coziness with Iran has fueled nervousness for many 
Venezuelans in the opposition, who feel this is potentially 
the most reckless step in Chavez' love affair with the "axis 
of evil," given Iran's proven links to terrorism and defiance 
of the international community on nuclear matters.  For 
Chavez sympathizers, working with Iran is just like dealing 
with any other country -- it is so accepted that some Chavez 
campaign signs even show him riding a bright red VenIran 
tractor.  Despite abounding rumors that Iranian activities 
are masking uranium mining and enrichment, no information has 
surfaced to confirm this.  The Iran-Venezuela relationship is 
one to watch, as the BRV has clearly signaled that it intends 
to strengthen this link on economic terms, and perhaps in the 
long run on political terms as well.  End comment. 
 
BROWNFIELD