Washington: The World Bank has insured its first private-sector project in Iran even as the United States is pressing the international community to isolate Tehran diplomatically and economically.
The bank's Multilateral Investment Guarantee Agency (MIGA), which offers political risk insurance for projects in developing countries, has issued $122 million (Dh447.74 million) in coverage for a petrochemical plant being developed by Asian investors.
The guarantees were approved in the week before Paul Wolfowitz, the Pentagon's former No. 2 official, took the helm as World Bank president on June 1, bank sources said, also noting that the US representative on MIGA's board abstained from voting on the project.
The MIGA backing comes at a time of heightened international tensions with Tehran, led by the United States, over its weapons programme and a recent storm over President Mahmoud Ahmadinejad's call for Israel to be "wiped off the map".
Iran insists it wants only to produce fuel for nuclear power stations and not for an atomic bomb.
The 15-year MIGA guarantee covers investments by Cementhai Chemicals Co Ltd, a wholly owned subsidiary of Siam Cement Public Co, and National Petrochemical Public Co Ltd, both from Thailand, as well as for Itochu Corp of Japan.
The joint-venture company, Mehr Petrochemical Company, will use natural gas from the country's South Pars gas field, a giant offshore gas reserve being developed by the Iranian government in the Gulf.
The Mehr plant will produce polyoelfins, including high-density polyethylene, to be exported mainly to China to feed its booming economy.
"This project represents an important step in Iran's path toward non-oil growth and promises significant development impacts, including the generation of jobs," said Yukiko Omura, executive vice-president of MIGA.
A member of MIGA's board, which includes 165 countries, said the project was not overly contentious but had "US political undercurrents".
"The questions did arise from a chair or two whether this was really an additional developmental contribution through the World Bank Group or whether this was a prosperous industry sector riding on high oil prices," the official said.
Iran has the second-largest natural gas reserves in the world and the project would help Iran diversify its exports away from oil, MIGA said in a statement on its website.
Miga: Investment inflow via political risk coverage
- MIGA was established in 1988 to promote foreign direct investment in developing countries by guaranteeing the safety of investments through political risk insurance and advice.
- MIGA's presence is regarded as a signal to investors to follow.