Iran and Iraq have signed an agreement under which Iranian banks will facilitate the opening of letters of credit (L/Cs) for Iraqi business people, thus making it easier for them to do business with Iran.

The agreement was announced at the same time as a two-day conference on Iran-Iraq economic and trade opportunities resulted in parties from both countries agreeing several measures aimed at boosting trade between the two countries that have been at political loggerheads for a generation.

Trade boost

"The Export Guarantee Fund of Iran (EGFI) and the Iraqi Trade Bank signed an agreement a few days ago," according to the director-general of the Iranian Export Development Bank (IEDB), Dr Nowrouz Kahzadi.

Under the terms of the agreement, Iranian banks will facilitate the opening of L/Cs for Iraqi business people at Iranian banks, he told IRNA, the official Iranian news agency on 10 August 2004.

"Trade between Iran and Iraq is expected to reach between US$3-4 billion annually because of the high economic potentials of the two countries," Kahzadi said.

Similarities and differences

The Iranian financier is keen to play up what the two countries have in common, including the religious and cultural similarities between Iran and Iraq.

These similarities provide the background for the consolidation of bilateral trade ties according to Kahzadi, who is clearly optimistic that political difficulties including allegations from the Iraqi Interim Government that Iran is behind the activities of Iraqi insurgents can be overcome.

Closer trade ties would help relations, but for this to happen the 2-3 August 2004 Iran-Iraq conference concluded that there was first a need to negotiate and reach agreements on transit and free exchange as well as transportation between the two countries. Participants also called for removal of visas and facilitating and controlling border affairs.

Bank in Iraq

Iran also stressed at the conference that it would be keen to see at least one of its banks established in Iraq. "The Iraqi banking system was faced with crippling debts after the fall of the Iraqi Baathist regime and could not continue its banking activities," Kahzadi told IRNA.

The conference on Iran-Iraq trade and economic opportunities was held in Tehran and was organised by the Economic Department of Iran's Foreign Ministry in cooperation with the International Fund for Iraq's Reconstruction.

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