Gulf cease-fire brings building boom hope

Press, 25 August 1988, Page 31

Gulf cease-fire brings building boom hope

NZPA-Reuter Zurich A Gulf cease-fire brings prospects of a reconstruction boom in Iraq and Iran, but the optimism is tempered by caution among Western firms with a stake in the area. Some of those which abandoned projects when war broke out now hope to recoup their investment, a poll by Reuter correspondents found. They cite safer conditions and the fact that billions of oil dollars need no longer be spent on arms.

But the scale of war damage raises doubt about how much money Iran and Iraq will be free to use to settle debts — something contractors say will be important in allaying concerns.

Main projects stalled by the war include a nuclear power plant in Iran being built by West Germany’s Siemens A.G. and the Bandar Khomeini petrochemical plant, a joint

venture by Iran and Mitsui and Company of Japan. A spokesman for Siemens’ Kraftwerke Union (K.W.U.) power plant division said it was too early to say whether construction of two blocks of the nuclear reactor at Busher would now go ahead.

“In principle we would be ready to negotiate,” he said.

The project, begun in 1975, was broken off in 1979 after the revolution in Iran because K.W.U. was not fully paid. On the other hand, Framatome, leader of a French consortium building a nuclear power plant at Khorramshahr in Iran, said it has no hope that the site would be reactivated.

A spokesman said the work stopped in 1979 and the site was badly damaged in the war. The contract is in arbitration

but Framatome thinks Iran has no further interest in it.

Other firms said they might not rush back to unfinished work. “We are still interested but on the condition that we can work in reasonable surroundings,” said a spokesman for Losinger A.G., a Swiss construction company that broke off work on two projects in Iran after the Shah fell.

Japanese industry sources said Mitsui wants to withdraw from the SUS3.S billion ($5.48) Iran-Japan Petrochemical Co project in Bandar Khomeini. Japanese engineers abandoned the near-com-plete project in 1984 after some were injured in Iraqi , air raids. Italian firms point to a dispute between the State industrial group, Istituto per la Ricostruzione Industrial (1.R.1.), and Iran over debts for building docks at Bandar Abbas.

1.R.1. claims debts of SUS96O million. Iran acknowledges about one third of this. The Trade Minister, Renato Ruggiero, went to Iran recently and set up a committee to search for a compromise within 60 days. A settlement could clear the way for closer commercial ties. Two Finnish construction firms, Haka Construction Co-operative, and YitYhtyma, hope a cease-fire will speed partial payment still due for work on an entertainment centre worth SUSI2S million which they built on an island in the Tigris north of Bagdad between 1980 and 1983.

Spanish trade sources said Dragados Y Construcciones had two projects suspended by war — one at Bandar Abbas port and the other to build an antibiotics factory in Iraq. At the Confederation of Danish Industries, the

marketing chief Christian Wittenkamp said Denmark stood to gain soon new orders worth up to 8U5550 million from Iran alone.

The main problem remained financing projects in Iran and Iraq and outstanding debts in Iraq, Mr Wittenkamp said. Iraqi debt service problems were also cited by Business International S.A.; a Geneva-based business consultant, as a potential stumbling block to regional recovery. “Political instability in Iran and problems with debt servicing in Iraq will check reconstruction plans in the event of a cease-fire in the Gulf War,” it said in a study. Continuing weak oil prices would hurt Iraq, with the bigger foreign debt.

But for firms that can find the financing, Iran and Iraq hold promise of rich pickings.