Page:President's Daily Brief (1974-02-26).pdf/4



India and Iran have concluded a major trade agreement that, will go a long way toward ensuring that India’s oil requirements are met. In return, India will supply cement, steel products, rail cars, machinery, and fishing trawlers.

India will also receive two credits totaling $370 million to expand iron ore mining operations and alumina production. When these projects are completed, India will supply Iran with 2.4 million tons of ore pellets and 100,000 tons of alumina per year for 20 years.

Neither the amount of crude oil involved nor the credit terms for the loans were made public. Although Iran’s Minister of Economy claims that the agreement did not involve any “concessionary” price for oil, the cost probably will be well below the posted price. Iran already supplies 60–65 percent of India’s crude imports.

Iran also agreed to help finance an expansion of India’s refinery at Madras from an annual capacity of 2.8 million to 3.5 million tons. The refinery is owned jointly by the India Government, National Iranian Oil, and American International Oil.

In addition, India’s balance-of-payments problem will be considerably eased because India will be allowed to pay part of its oil import bill with future exports to Iran. By providing 65,000 tons of steel and 300,000 tons of cement to Iran, however, India could intensify its already critical domestic shortages of both products.

From the Shah’s standpoint, the deal with India has a number of attractive features. In the short run, it will provide Iran with some badly needed industrial goods and reinforce Tehran’s interests in foreign refining operations. Over the longer term, it will give Iran an important source of supply for its ambitious steel and aluminum output plans. These plans call for Iran to be a substantial exporter of steel and aluminum products - - a goal which could bring Tehran into competition with New Delhi in years to come. 1