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