Jan. 9 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad, facing tighter U.S. sanctions and rising tensions in the Persian Gulf, will turn to his diminished group of allies in Latin America for support this week.
Ahmadinejad arrived in Venezuela yesterday to kick off a four-nation tour to push investment projects such as a hydro- electric power plant in Ecuador. He’ll be joining forces with leaders like Venezuela’s Hugo Chavez and Cuba’s Raul Castro in taking shots at the U.S. in its own backyard, defying attempts to isolate Iran over its nuclear activities.
Iran’s Latin American allies shouldn’t expect too much in return. Iran has yet to fulfill pledges made by Ahmadinejad on previous trips -- he’s made five since 2005 -- to build a port in Nicaragua and an oil refinery in Ecuador. Unlike during his last regional tour in 2009, he won’t visit Brazil, where President Dilma Rousseff has shown little interest in deepening ties forged by her predecessor Luiz Inacio Lula da Silva.
“The promises of aid and investment have not been kept,” Cynthia Arnson, Latin America program director at the Woodrow Wilson International Center for Scholars in Washington, said in a phone interview. “This is clearly a political solidarity tour to reinforce relationships with a small number of allies.”
After holding talks with Chavez today, Ahmadinejad will travel to Nicaragua to attend the swearing-in ceremony tomorrow of President Daniel Ortega, who was re-elected to a second consecutive term in November. He’ll also visit Cuba and Ecuador during the five-day tour.
Under Ahmadinejad, Iran has expanded its economic, political and military influence in Latin America, taking advantage of an upswell of anti-American sentiment in the region led by Chavez and his eight-nation Bolivarian Alliance for the Americas.
State Department spokeswoman Victoria Nuland told reporters Jan. 6 that Ahmadinejad’s trip show he’s “desperate for friends and flailing around in interesting places” to find them as international pressure builds against him.
Since 2005, Iran has opened six embassies in Latin America and more than doubled trade with Brazil, the region’s biggest economy. The diplomatic offensive has drawn the attention of Secretary of State Hillary Clinton, who in 2009 said that Iran is building a “huge” embassy in Nicaragua. Iranian officials have refuted the claim.
Bolivia moved its only embassy in the Middle East from Cairo to Tehran while Ortega has also announced plans to open its own diplomatic mission there.
Iran’s biggest presence is in Venezuela. Chavez has visited the Islamic Republic nine times, signing more than 100 bilateral deals to support everything from a Venezuelan campaign to build low-income homes to a joint venture to manufacture bicycles, which Chavez jokingly referred to as “atomic” two-wheelers.
Most of the investment hasn’t gotten off the ground, said Arnson, who last year edited a report called “Iran in Latin America: Threat or ‘Axis of Annoyance?’”
For example, pledges from 2007 and 2008 respectively to help build a $350 million deepwater port off Nicaragua’s Atlantic coast and an oil refinery in Ecuador have yet to materialize.
More worrisome are deals to help Venezuela explore for minerals including uranium, said Jose Cardenas, a National Security Council official under President George W. Bush. The two countries in 2007 also established in Caracas the Banco Internacional de Desarrollo, which together with its main Iranian shareholder, Bank Saderat, is accused by the U.S. of being a vehicle for the Ahmadinejad government’s funding of Middle Eastern terrorist group Hezbollah.
“They’ve placed a bet on Chavez,” Cardenas, who helped draft U.S. policy toward Cuba at the NSC, said in a phone interview. “Venezuela has a massive banking system where you can move billions of dollars and nobody will blink.”
Ted Piccone, a senior fellow at the Brookings Institution in Washington, said that while Iran “needs as many friends as it can get” the opaque nature of its outreach in Latin America poses a threat to U.S. security. He pointed to Argentine prosecutors’ allegations that Iranian officials, including Defense Minister Ahmad Vahidi, were involved in the 1994 bombing of a Jewish center in Buenos Aires that killed 85 people as evidence of Iran’s sinister motives.
“Could Iranian security forces be located in these embassies?” he said in a phone interview. “It’s something that has to be watched very closely.”
An official at Venezuela’s Foreign Ministry declined to comment when contacted by Bloomberg News and phone calls to deputy Foreign Minister Temir Porras were unanswered.
Iranian Energy Minister Majid Namjou, who will accompany Ahmadinejad along with a group of businessmen, said a number of deals will be signed during the current tour, including plans to build the hydroelectric plant in Ecuador. He said Iran is competing for the contract with China, according to comments made to the state-run Islamic Republic News Agency.
Ahmadinejad’s trip may be upstaged by events closer to home after Iran threatened last month to shut the Strait of Hormuz, a transit point for a fifth of oil traded worldwide, if sanctions are imposed on its crude exports.
The European Union may agree to an embargo on Iranian oil at a meeting Jan. 30, officials said last week. U.S. sanctions imposed last year aim to cut off dealings with Iran’s banking system, making it difficult for consumers to buy the country’s oil, in an effort to force Iran to abandon nuclear work that the U.S. and allies say may be intended for weapons development.
Iran denies seeking to build atomic weapons and says it’s pursuing nuclear technology for civilian purposes.
The threat of broader sanctions led the Iranian rial to plunge to 17,800 per U.S. dollar on Jan. 2, prompting the central bank to take measures to arrest the decline. The official rate yesterday was 11,230 rials a dollar, according to the central bank’s website.
The International Monetary Fund estimated in September that Iran’s economy would grow 3.4 percent in 2012 while Deputy Economy Minister Mohammad-Reza Farzin last month said inflation may hit 22 percent by the end of the current calendar year in March.
Some leaders in Latin America, who have long resented U.S. military and economic dominance, have stood by Ahmadinejad. Chavez has called him a fellow “gladiator of the anti- imperialist battle” against the U.S., while Lula in 2010 voted against United Nations Security Council sanctions on Iran and worked with Turkey to broker a deal to swap the country’s nuclear fuel.
Rousseff distanced herself from her predecessor’s close ties to Iran. Shortly after her October 2010 election, she criticized Lula’s abstention on a UN resolution condemning human rights abuses in the country.
Tovar Nunes, a spokesman for Brazil’s foreign ministry, said a visit by Ahmadinejad was never under consideration even though the two countries enjoy an “active diplomatic agenda.” Brazilian exports rose 18 percent to $2.3 billion from January to November 2011 compared with the same period a year ago.
The U.S. is stepping up its monitoring of Iran’s activities in the region. In May, it imposed sanctions on state-owned oil company Petroleos de Venezuela SA for defying sanctions. Then in October, it implicated an Iranian man working out of Mexico in a plot to kill Saudi Arabia’s ambassador to Washington.
The House of Representatives Foreign Affairs Committee will hold hearings as soon as this month to investigate Iranian ties to Latin America.
Farideh Farhi, an Iran specialist at the University of Hawaii in Honolulu, said that U.S. fears are raised every time Ahmadinejad visits the “same four countries” and then subside when he leaves.
“No one’s talking any more about the 400-member Iranian embassy in Nicaragua,” Farhi said in a phone interview. “I guess someone checked and there’s nothing like that there.”
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