Old Friend Visits Mandela to Talk Oil, But Deal With S. Africa Could Irk US

A high-level Iranian delegation is due to hold talks in South Africa today to forge closer ties and discuss a controversial oil-storage deal that threatens to raise tensions between Washington and Pretoria.

Iranian President Hashemi Rafsanjani, who's leading the 104-strong group, is expected to ask South African President Nelson Mandela to push through an agreement, temporarily shelved last year, to store Iranian crude oil in a large underground depot at Saldanha Bay, about 60 miles north of Cape Town. Both the United States and Israel have voiced opposition to the deal.

"We would look unfavorably on any action that would strengthen Iran's economic enhancement," says a United States diplomat in Pretoria, South Africa.

Among the other issues that could be discussed are joint ventures to develop Iran's natural gas fields and market oil to Africa, the trade imbalance in favor of Tehran, and Iranian assistance in building up South Africa's oil-refining capacity, a South African Foreign Affairs Ministry spokesman says.

The two-day visit is the last stop in a six-nation African tour designed to boost Tehran's trade relations and influence in the region. It follows last month's tightening of Iran-Libya sanctions by the Clinton administration with a law that punishes non-American firms that invest $40 million or more a year to "enhance" Iran's or Libya's petroleum sector.

Most analysts say the oil-storage deal will not violate the new law. Still, on Wednesday the US announced it would closely watch South Africa's business dealings with Iran and examine any agreements to see if they violate the new sanctions.

Mr. Rafsanjani is the latest person in what Washington considers to be a controversial list of individuals, which includes Nation of Islam leader Louis Farrakhan and Cuban President Fidel Castro Ruz, who have visited Mr. Mandela since he swept to power in April 1994 elections.

In recent months, Washington and Pretoria have locked horns over Mandela's refusal to abandon his "old friends" such as Libya, Iran, and Cuba who helped the now-ruling African National Congress during its struggle against apartheid.

During a visit to Tehran last April, South African Foreign Minister Alfred Nzo told Iranian officials that Washington had "nothing to do" with relations between Iran and South Africa. This sparked concern among some South Africans that such talk would threaten foreign investor confidence at a time when South Africa's currency, the rand, was - and still is - losing value.

Iran views the 45-million-barrel capacity Saldanha Bay depot as a strategic place to safeguard its oil reserves in the event of conflict in the Persian Gulf or a global blockade interrupts shipment.

Last year's agreement calls for Iran to lease two tanks to store up to 15 million barrels of oil. The deal was put on hold after environmental concerns were raised over potential oil spills endangering exotic birds living on Saldanha Bay.

Next month, the findings from an environmental study commissioned by the government-owned Strategic Oil Fund, which manages Saldanha Bay's operations, is to be presented to an independent panel of experts. South African officials reportedly have said that the study is the sole remaining obstacle to completing the deal.

Kobus van Zyl, the fund's general manager, predicts the panel will approve the deal and says South Africa could be storing Iranian crude oil as early as next March - if the political will is there.

"I'm optimistic that we'll get the go-ahead," he says. "But we'll have to wait and see, after Rafsanjani's visit, how South Africa's politicians will react."

Last weekend, a foreign-policy discussion paper presented at a government workshop argued that South Africa's Middle East policy should be based on its energy needs. South Africa now imports 65 percent of its crude oil supply, or 450,000 barrels a day, from Iran.

Some observers, however, warn that South Africa's politicians need to tread carefully in order to not jeopardize relations with Washington.

"Anything that's going to be seen to enrich a country which the US sees as a sponsor of terrorism is obviously going to concern Washington," says Greg Mills, director of South Africa's Institute of International Affairs in Johannesburg.

"South Africa will have to look at any agreement [with Iran] with scrutiny," he says.

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