Janeman Latul

$600m Indonesia-Iran Project Stalls on Risk Fears

The country’s biggest fertilizer producer, PT Pupuk Sriwijaya, said on Tuesday that a planned $600 million project in Iran was now being put on hold and would not start in 2010, reversing an earlier announcement in June.

“The fertilizer plant project is still uncertain. We’re not pushing ahead with the project for now,” said Dadang Heru Kodri, Pusri’s president director. “We’re waiting for a global economic recovery first. Let’s wait to next year to see how the world economy develops.”

Various aspects of the project also need to be studied further, he said, while declining to elaborate.

Dadang’s comments were in marked contrast to ones he made three months ago, when he said that the two countries expected to begin construction of the project by January 2010.

The project was first announced in 2007 after government-to-government talks between President Susilo Bambang Yudhoyono and Iranian President Mahmoud Ahmadinejad.

It was originally supposed to have been completed this year, but concerns on the part of the Indonesian government about financing and the risks of investing in Iran are believed to have stalled it.

In 2007, Pusri was picked to form a joint-venture company called Hengam Petrochemical with Iran’s National Petrochemical. The project’s plant, to be located in Asaaluyeh, southern Iran, was expected to produce about 3,500 tons of urea and ammonia per day on completion, with gas supplies coming from the nearby South Pars field, which holds about 8 percent of the world’s total gas reserves.

Dadang had said he expected the project to receive $450 million in financing from the Islamic Development Bank, $150 million from the Iranian National Bank and $100 million from the Iranian government. Pusri itself was supposed to have put up the remaining $100 million.

Another government official said that there were major concerns about the political and economic risks of working with Iran.

“We’ve said it too many times, the risks of investing in Iran are very high after the problematic presidential election,” said Muhammad Said Didu, secretary of the State Enterprises Ministry. “The political situation also makes it difficult to secure financing.”

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