Date: 3/20/2000

Published In: Dow Jones News Wires

Author/Reporter: By Daniel Rosenberg

CHICAGO -(Dow Jones)- A decision by the U.S. last week to allow imports of Iranian rugs and pistachios opens the door a crack, but only a crack, for U.S. wheat exporters trying to get a foothold in the Asian country. Firm barriers - including the lack of U.S. export credits, strong competition from other exporters and continued political distrust between the long-time enemies - stand in the way of U.S. wheat exports to the world's biggest wheat importer, experts said. Iran hasn't bought U.S. wheat in more than a decade.

But the announcement last week from U.S. Secretary of State Madeleine Albright easing sanctions on imports was a friendly gesture that should help relations a little.

"Wheat sales stand a better chance than ever before, because now it's kind of politically correct," said Shahriar Afshar, president of the Iranian Trade Association, a trade group in San Diego that promotes relations between Iran and the U.S. Before, he said, Iran was reluctant to import without a quid pro quo.

Last year, when the U.S. eased sanctions against Iran , U.S. grain processor Archer Daniels Midland Co. (ADM) moved quickly to start corn sales to the country. The company, based in Decatur, Ill., developed contacts with private buyers in Iran and continues to see plenty of activity after the first wave of buying five months ago.

But the wheat picture remains cloudy.

"We're cautiously pessimistic," said Lew Batchelder, a group vice president at ADM in the grain export side of the company. "We'd like to be optimistic, and we're there and ready to do business when it comes."

So far, all of the U.S. corn bought by Iran has been through private transactions, Batchelder said. But the government trading agency handles wheat purchases, and doesn't seem interested in U.S. wheat without some credits to make it easier to buy.

Iran Wants Export Credits Before Buying US Wheat

"They have said that for U.S. wheat to be competitive, the only way is for the U.S. to give them credits," Batchelder said. "They're appealing for a General Sales Manager package, and I don't think that's something the U.S. is in the mood to do." Under the GSM-102 program, U.S. banks may extend federally backed credit lines to foreign banks for the purchase of U.S. agricultural commodities. The U.S. sells wheat to countries such as Pakistan under the program, but hasn't been willing to do so for Iran mainly because of politics. The U.S. says Iran foments terrorism, and is loathe to help Tehran purchase U.S. products.

Richard Fritz, general sales manager for the U.S. Department of Agriculture, was traveling Monday and unavailable for comment.

For almost a year, trade group U.S. Wheat Associates has been trying to arrange a meeting with Iran 's government wheat-buying agency, and so far, it's had no luck.

"We've been trying to meet with them since last spring...and we haven't been able to," said Dawn Forsythe, a spokeswoman for U.S. Wheat. "They've let it be known that when they're ready, they'll let us know."

If the group does sit down with Iran 's buyers, Forsythe said, it will emphasize the high quality of U.S. wheat, and the benefits Iran might get from having another supplier.

Iran typically buys white wheat, the type grown in the Pacific Northwest region of the U.S. It is expected to import as much as 7.5 million metric tons of wheat in the current marketing year that ends May 31.

Forsythe suggested that Iran embraced U.S. corn, and not U.S. wheat, because there are so many more places to buy wheat. Iran buys wheat not only from Australia and Canada, but from France and Argentina, all of which supply relatively high-quality product. But high-quality corn is harder to find. Since Sept. 1, Iran has purchased 603,700 metric tons of U.S. corn, according to the USDA, making it the eighth-largest U.S. customer for the product.

Political Tension Still Gets In The Way

It's not just economics that caused Iran to buy U.S. corn and ignore U.S. wheat. Iran 's private buyers, who handle most corn transactions, don't feel tied by politics, said Afshar, of the Iranian Trade Association. But some analysts say the government, which handles most wheat buying, baulks at buying food from "the Great Satan," as conservative elements in the country refer to the U.S. It would have behooved U.S. wheat exporters more, Afshar said, had Washington allowed U.S. companies to invest in Iran 's oil industry. And unless the U.S. provides Iran the financial wherewithal, wheat sales probably won't happen any time soon."The lack of export guarantees and government financing really hinders the competitiveness of U.S. wheat in the international market," Afshar said.

Some European traders fear that if the U.S. ever does do wheat business with Iran , it could impede European sales.

" Iran isn't a traditional market, but it takes in a good share of French exports these days," said one Paris-based trader. Drought has slashed Iran 's domestic production this year, making it more import-dependent. But its government recently indicated that it might import far less wheat in the coming marketing year.

(Myles Neligan in London contributed to this article.)

-By Daniel Rosenberg, Dow Jones Newswires;

312-750-4118; daniel.rosenberg@dowjones.com

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