US embassy cable - 05YEREVAN1055

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