Iranian president flies to Europe, mega business deals readied

Reuters News
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Posted: Jan 25, 2016 7:09 AM

By Crispian Balmer and John Irish

ROME/PARIS (Reuters) - Iranian President Hassan Rouhani flew to Italy on Monday at the start of his first official visit to Europe, looking to sign multi-billion dollar contracts to help to modernize Iran's economy after years of crippling financial sanctions.

Heading a 120-strong delegation of Iranian business leaders and ministers, Rouhani will spend two days in Rome before flying to France on Wednesday, hoping to burnish Tehran's international credentials at a time of turmoil across the Middle East.

While diplomacy will figure high on his agenda, trade ties are likely to dominate the headlines, with Iran announcing plans to buy more than 160 European planes, mainly from Airbus <AIRP.PA>, on the eve of Rouhani's departure.

Officials in Rome said Italian companies were poised to sign deals worth up to 17 billion euros ($18.4 billion) over the next two days, including in the energy and steel sectors.

The deals will give a boost to Prime Minister Matteo Renzi, who is struggling to revive Italy's underperforming economy.

A pragmatist elected in 2013, Rouhani championed a deal with world powers last year under which Iran curbed its disputed nuclear program in return for the end of U.S., EU and United Nations sanctions this month.

He is anxious to prove to Iranians that the accord, contested by many hardliners, was worth it and will help ease their economic hardships. He also wants to promote Iran's position as a major regional player and key to any solution to the long-running conflict in Syria.

During his visit to Italy, he will meet Renzi, Pope Francis and local business leaders. He is set to meet French President Francois Hollande in Paris on Thursday.

"This is a very important visit," said a senior Iranian official. "It's time to turn the page and open the door to cooperation between our countries in different areas."

However, wherever he goes, he is likely to hear condemnation of his country's human rights record, with Iranian opponents planning a major rally in Paris on Thursday.

BUILDING TRUST

Europe was Iran's largest trading partner before sanctions, with Italy and France seen as particularly close to Tehran. Both countries sent trade delegations to Iran last year in the wake of the nuclear accord laying the groundwork for tie-ups.

Among the deals being readied for Italy was a pipeline contract worth between $4 billion and $5 billion for oil services group Saipem <SPMI.MI>, a source with knowledge of the matter said. Saipem was not immediately available for a comment.

In addition, Italian steel firm Danieli <DANI.MI> will sign commercial agreements worth up to $5.7 billion with Iran, a company spokesman said. These accords will include a joint venture with other international investors, to be called Persian Metallics, worth $2 billion.

Although many sanctions relating to Iran's nuclear program were lifted, most U.S. measures remain in place. Non-U.S. banks may trade with Iran without fear of punishment in the United States but U.S. banks may not do so, directly or indirectly.

This means any trades with Iran in U.S. dollars cannot be processed via the U.S. financial system -- a significant complication given the dollar's role as the world's main business currency.

While Italy was not involved in the nuclear talks, France was and it took a hard line toward Tehran in the negotiations. It has also been outspoken in its condemnation of Iran's support for Syrian President Bashar al-Assad and skeptical of the country's other Middle East interventions.

"Trust needs to be built. It's like love. It is only the proof of love that counts," said a senior French diplomat.

"On the nuclear accord the relationship is relaxed, but not on the other subjects. There is no change on the Iranian position for now on a number of regional issues ... so the idea (of the visit) is to open a new page," the diplomat said.

The trip to Europe comes as global diplomats are trying to arrange the first peace talks in two years to end the Syrian civil war. Shi'ite Muslim Iran is Assad's strongest ally, while European countries back his mainly Sunni Muslim opponents.

(Writing by Crispian Balmer, with additional reporting by Massimiliano Di Giorgio, Stephen Jewkes and Steve Scherer, editing by Peter Millership)