Trading giant Itochu Corp. announced Thursday that it will launch a partnership with two Thai firms in a bid to begin producing polyethylene in Iran in 2008 in a deal that would make it the first Japanese company to invest in Iran since 1989.
Itochu will sign corporate alliance pacts with the Siam Cement Public Co. group and Thailand's state-run PTT Public Co. group for the 25 billion yen investment, the company said.
Itochu and the Thai firms will establish an investment firm in Iran later this month along with Iran's state-run National Petrochemical Co., according to Itochu.
Itochu would be the first Japanese firm to invest in Iran since trading house, Mitsui & Co. and others pulled out of a petrochemical venture with Iran in 1989.
In 1971, Mitsui formed a joint venture with Iran's state-run NPC to build a petrochemical plant, but it was suspended due to the Iranian Islamic Revolution in 1979.
Failing to resume the project due to the Iran-Iraq War that began in 1980, Mitsui decided to exit the country, and the joint venture failed to resume the project.
The alliance between Itochu and the Thai firms will take a 60 percent stake in the investment firm, it said. The Iranian entity will hold the remainder.
A U.S. law restricts business operations by companies engaging in oil and natural gas development projects in Iran from operating in the United States, due to Tehran's suspected nuclear arms program.
Itochu and its partners believe their petrochemical investment in Iran will not go against the U.S. law as it will not involve oil-related development, Itochu said.
Of the 25 billion yen needed for the investment, about 70 percent will be financed by loans from parties that include the Japan Bank for International Cooperation.