President Mahmoud Ahmnadinejad shakes hands with his Sri Lankan counterpart Mahinda Razapaksa in Tehran in November 2007. (file photo)

Iran and Sri Lanka are expanding bilateral ties in a range of fields amid US pressures and threats.
In line with the new political/economic developments, President Mahmoud Ahmadinejad is to visit Sri Lanka for two days from April 28 in response to an invitation from President Mahinda Rajapaksa who visited Iran last November.
His itinerary will include the inauguration of the construction of the Iranian-funded ($450 million) Uma Oya hydroelectricity project at Wellawaya in the Monaragala district. On completion, the plant is expected to produce 100 megawatts of electricity.
The visit is also expected to result in the finalization of an agreement on Iranian financial and technical assistance to enable the Sapugaskanda oil refinery to refine Iran’s light crude. Iranian investment in the project is expected to be one billion dollars.
Sri Lankan media reported that Iran will increase investment in an oil refinery expansion project by up to one billion dollars, Petroleum and Petroleum Resources Development Minister A.H.M. Fowzie said.
According to IRNA, Fowzie said, “Iran’s President Mahmoud Ahmadinejad has allocated this amount which would cover 70 percent of the investment for the refinery’s expansion, in the form of a 10-year loan, with a five year grace period on the payment of installments.“
He added, “Iran had earlier provided the oil we need free of interest for four months.“
According to the report, Iran is the largest supplier of crude oil to Sri Lanka.
Managing Director of Ceylon Petroleum Corporation (CPC) Ashantha De Mel has said that the pilot study on increasing production of Sri Lanka’s only refinery from 50,000 to 100,000 barrels per day has been completed by Iranian engineers.
He added, “Iran would undertake a major part of the investment for expanding this oil refinery by providing 70 percent of the costs while the CPC would cover the rest.“
Fowzie said that the project would yield noticeable profits for investors.
De Mel, who visited Iran in early April 2008, expects the project’s executive phase to begin within the next three to four months.
Iran has also agreed to provide low-interest credit to Sri Lanka to enable it to purchase equipment from Pakistan and China.
Sri Lankan Irrigation and Water Management Minister Chamal Rajapaksa said the Uma Oya multi-purpose project will add 100 megawatts of electricity to the national grid and irrigate 8,000 acres of paddy.
He said a dam will be built at Welimada, Puhulpola across the Uma Oya while water will be brought to Kirindi Oya in Wellawaya through a 22 km long tunnel, to cultivate 5,000 acres of paddy field in Wellassa Handapanagala together with 3,000 acres of paddy lands in Kuda Oya.
The Uma Oya Project will supply water to the proposed Hambantota harbor, the airport at Weerawila and also the new industrial town at Hambantota, in addition to being used in the development of the area, the minister said.
He said compensation will be paid at the present value to those who lose their land and homes while plans have also been made to provide them alternate housing.
Nearly 20,000 acres in the Welimada area will be developed due to the Uma Oya Project which is to be completed by Iran in four years.

On Friday, Pakistan and India agreed to complete the IPI gas pipeline by 2012 before Iran begins exporting gas in 2013. China has also expressed its eagerness to become part of the $7.5 billion IPI gas pipeline project--much to the dismay of Washington and its friends.
In this respect, Iranian Ambassador to Pakistan Mashallah Shakeri said that the Islamic Republic of Iran supports the idea of exporting gas to China via Pakistan. “However, we can only make a commitment after conducting a feasibility study but we support this idea,“ he told Pakistan’s ’The Post’ on Saturday.
“We basically support that but we cannot comment about it at this stage. We have to work it out and see how it can become viable,“ the envoy said at a news conference.
Pakistan has recently offered China a transit gas pipeline through its territory, along the historic Karakoram Highway to help meet its growing industrial needs. However, the ambassador said the Iran-Pakistan-India (IPI) pipeline is initially designed to incorporate the three countries.
He said that the inclusion of fourth country in the project would require a feasibility study before a final decision is made, adding that ’there is no plan to ink the IPI agreement during President Mahmoud Ahmadinejad’s brief four-hour stopover in Islamabad on Monday. However, involvement of multiple partners in the gas pipeline project would bring stability and viability to the multi-billion dollar project’.
“We are seriously studying Pakistan’s proposal to participate in the IPI gas pipeline project,“ Chinese Foreign Minister Yong Jiechi told reporters at a joint news conference with his Pakistani counterpart Makhdoom Shah Mahmood Qureshi on Friday.
President Ahmadinejad in his Monday meeting with President Pervez Musharraf and Prime Minister Yousaf Raza Gillani will discuss bilateral matters, issues of the region and the Islamic world and trilateral cooperation between Iran, Pakistan and Afghanistan.
The Iranian president will lead a high-level delegation comprising of foreign, commerce, petroleum and energy ministers besides officials of state-run Iranian banks. About the president’s visit, Shakeri said that his country attaches great importance to ties with Pakistan in all areas and they would continue to have extensive cooperation in political, security and other areas.
About the delay in launching a bus service between the two countries, he said that the Iranian government is ready to launch the much-awaited bus service between Quetta and Zahedan but the Baluchistan provincial government (in Pakistan) is not ready so far. “It is now up to the Baluchistan government to provide necessary facilities,“ he said.
The new gas pipeline could be worth more than $7.5 billion, making it the most lucrative project ever undertaken by the two south Asian neighbors. Funding will come from international lenders and commercial banks.
In brief, another reminder of the pipeline project edging closer to reality is President Mahmoud Ahmadinejad’s visit to Pakistan on Monday, contrary to the widespread impression that it will be shelved due to relentless American opposition.
Ahmadinejad’s stopovers in Islamabad and New Delhi will focus on helping both governments overcome glitches in the Iran-Pakistan-India gas pipeline project and seek an early signing of the agreement.
He will make a four-hour stopover in Islamabad while flying to Sri Lanka on a two-day state visit. He would pause for an equal duration in New Delhi on his way back to Tehran.
Pakistan’s long-term future rests on success in embarking upon key new projects, such as the IPI gas pipeline with a possible extension into China in future.

The government needs to come up with a proper policy on cutting bank lending rates to curb inflation and liquidity growth. Otherwise, reducing lending rates alone will only promote rent-seeking in the banking system and channel funds to more profitable sectors such as housing and construction.
Stating the above to Fars news agency, Mohammad Baqer Sadri, a member of Iran’s Economics Association, added, “Profit rates should also be increased or decreased in various sectors of the economy based on the inflation rate.“
On the volume of liquidity, which stands at around 155 trillion rials, he cautioned that if bank lending rates are computed on the basis of inflation rate and demands, those rates will inevitably experience a significant growth, changing the structure of national economy for good.
In conclusion, he said that the banking system should learn more about the flow of liquidity and be less obsessed with policies to compute lending rates, ’since printing money only increases the volume of liquidity which in turn pushes up the rate of inflation’.

Central Bank of Iran (CBI) has decided to establish two e-banks in the current Iranian year to March 2009.
Announcing this, deputy governor of CBI for modern technologies, Mohammad-Hossein Mehrani, told IRNA that Iranian experts are working on the establishment of such banks.
Once operational, the e-banks will conduct all banking operations electronically both within the country and abroad, Mehrani said.
He added that the banks will have no branches and their activities will be based at their headquarters. Establishment of the e-banks will reduce the cost of manpower and modernize the banking system, he noted.
Electronic banking solutions have many features and capabilities in common, but traditionally also have some that are application specific.
The precursor for the modern home online banking services were the distance banking services over electronic media from the early 1980s (the term online became popular in the late ’80s).

With the principal payment of its last foreign bond at 325 million euros, Iran has retired all its foreign bond issues, Meed Magazine reported.
Fitch Ratings, an international rating agency, said that henceforth it does not need to consider Iran in its risk rating since the country’s bond issues are a thing of the past.
The agency’s latest rating of Iran’s securities was B+.
The Central Bank of Iran (CBI) has not ruled out issuance of foreign bonds in the future but, given high oil revenues, it is not expected that the Islamic Republic will issue a new series of foreign bonds soon.
Some analysts contend that given the US pressures on Iran, it is unlikely that foreign banks will want to cooperate.
Meed refers to Iran’s serious need for foreign investments and mentions development of the country’s metro projects as an example.
Based on the Meed’s estimation, Iran needs $18.5 billion for the implementation of its metro projects.

Five business groups will visit five African countries this year.
Announcing this, head of Hamedan Chamber of Commerce, Industry and Mines told ISNA that the countries include Algeria, Tunisia, Sudan, Ethiopia and Libya.
Majid Mokhtar Mousavi said Egypt was also on the agenda and once visas are issued, the group will visit Cairo.
Talks have been held with two exhibition companies to prepare grounds for participation in international events.
“Countries interested in hosting Iranian producers should contact these two companies,“ he said.
Exports from Hamedan province, including carpets, ceramic and pottery, are mainly shipped to Italy, the Netherlands, Germany, Ukraine, the UAE, the US, Canada and Russia through this chamber.