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Reformist Iranian President Mohammad Khatami will receive a red-carpet welcome when he arrives in Tokyo at the end of this month on what Japanese officials describe as a historic visit that will usher in a new era for bilateral ties after years of near-estrangement.

Japanese government officials and business leaders have a strong desire to see relations between resource-poor Japan and oil-rich Iran become as close and friendly as they were before the 1979 Islamic Revolution.

But below the surface of the official fanfare and cordiality that is likely to characterize the atmosphere of the trip lies a burgeoning distrust of Iran, especially in Japanese political circles.

This may prove a major obstacle to efforts to forge closer bilateral ties not only in economics and trade, but in political and other areas in the medium and long term.

Khatami begins his four-day official visit Oct. 31. It will be the first such trip by an Iranian head of government since the Islamic Revolution. Khatami, a moderate cleric and staunch advocate of greater political and religious freedom, took the helm of government after a surprising and overwhelming victory over a conservative rival.

The Khatami administration has succeeded in mending soured ties with industrialized European countries as well as Persian Gulf neighbors such as Saudi Arabia. He visited Italy and France last year and went to Germany in July.

Since its inauguration in early 1993, the U.S. administration of President Bill Clinton has pursued a policy of “dual containment” against Iran and Iraq. Washington has accused Tehran of engaging in the production of weapons of mass destruction, sabotaging the fragile Middle East peace process, sponsoring international terrorism and abusing human rights. Tehran vehemently denies these charges.

The Clinton administration still applies economic and other sanctions on Iran, although some signs of a thaw in the icy ties — such as sports contacts and the lifting of an import ban on some Iranian foods — have emerged since Khatami’s inauguration.

Khatami’s visit here will be the culmination of a series of high-level government contacts between the two countries that began after he took office in summer 1997. For fear of antagonizing the U.S., its most important ally, Japan had restricted contacts with Iran.

For Japan, Iran’s importance has grown even further with the collapse earlier this year of hectic negotiations between Tokyo and Riyadh on extending Arabian Oil Co.’s drilling rights in the Khafji oil field, in the former neutral zone between Saudi Arabia and Kuwait.

The negotiations collapsed at the end of February after Japan rejected a Saudi demand to finance a $2 billion industrial railway in the kingdom. Arabian Oil, Japan’s largest oil producer fully backed by the government, lost the rights after nearly four decades. Operations in

the Saudi-controlled portion of the Khafji oil field were subsequently taken over by Riyadh.

Apparently reflecting its increased concern over energy security, Japan launched a regular forum with Iran for dialogue on energy issues last month. The forum is attended by top government officials in charge of energy policy.

Iran also has a strong desire to see strengthened ties with Japan, especially in economic areas, through increased official Japanese economic aid and private-sector investment, to help promote economic reforms.

According to government officials, Prime Minister Yoshiro Mori and Khatami will issue a joint statement in which Japan will declare its firm commitment to assist Iran’s reform efforts, especially its full backing of Tehran’s new five-year economic development plan, which began earlier this year.

The two countries will also revise and update an action program adopted two years ago to promote cooperation in a wide range of areas, especially in economics and trade.

The joint statement will contain the new version of the action program, which will call for, among other things, Japanese official and private support for the promotion of information technology in Iran, especially through the development of human resources.

In the new version of the action program, Japan will also pledge its full technical assistance for Iran’s entry into the World Trade Organization, economic aid for Afghan refugees who fled to the country and increased support for Iran’s fight against drugs, the officials said.

In their joint statement, Mori and Khatami will also pledge to strengthen bilateral political dialogue, the officials said. In this context, the Iranian president is expected to invite Mori to visit Tehran as soon as possible, and Mori is expected to say he will.

But no matter how vigorously officials trumpet the opening of a new era, much work remains to be done before bilateral ties can be strengthened as much as each side would like.

Japanese government officials say they will continue to ask Iran to take specific — and tangible — measures to quell international concerns over allegations against the Middle East country, including those that it produces weapons of mass destruction.

Still, some lawmakers in the ruling Liberal Democratic Party are increasingly skeptical about providing large-scale economic aid to Iran. This is because they are concerned about Iran’s missile program and also because they were offended by the alleged involvement of the Iranian Embassy here in the illegal export of military equipment by a shadowy private firm to Iran.

When the case of illegal military exports surfaced earlier this year, Tehran refused to cooperate in the Japanese police investigation.

“Sentiments toward Iran within the LDP now are not as positive as they were until a few years ago,” acknowledged a senior Foreign Ministry official, requesting anonymity.

On Oct. 7, Japan exchanged diplomatic notes with Iran on extending about 7.5 billion yen in additional official yen loans for a hydroelectric project on the Karun River, in the southern part of the country. The exchange of notes followed Cabinet approval of the loan provision the previous day.

In May 1993, Japan lifted a nearly 18-year freeze on fresh loans to Iran and provided about 38.6 billion yen for the power project. It had planned to extend additional funds but backed off in the face of strong political pressure from the Clinton administration. Other projects were also affected.

When then Foreign Minister Masahiko Komura visited Tehran in summer last year, he invited Khatami to visit Tokyo and also promised to extend about 7.5 billion yen in additional loans for the Karun power project.

It is unusual for the government to take more than a year to get Cabinet approval for its loan programs to developing countries after pledging them, as it did in the case of the additional yen loans.

Keeping with customary procedure, the government usually explains potentially sensitive loan programs to LDP panels on foreign-policy and obtains their approval before formally approving the programs at the Cabinet level.

This time it took the government nearly 14 months to gain approval for the additional Iran loans, a time frame that suggests strong negative sentiment within the ruling party toward the country.

During Khatami’s visit, Iran is unlikely to get what it probably wants most: Japan’s pledge to help finance a 770-km railroad linking the eastern city of Meshed and the strategic point of Bafq in central Iran.

Previously, Tehran had made Tokyo’s pledge of some 20 billion yen in loans for the railroad project a prerequisite for Khatami’s visit.

“It is too early for Japan to make any loan pledge for the railroad project because a feasibility study on it has not yet been completed,” a senior government official said on condition that he not be named.

According to the official, a Japanese consulting firm affiliated with the Ministry of International Trade and Industry is conducting the feasibility study and is expected to compile a report early next year.

But more importantly, the official pointed out, some officials of the Foreign Ministry remain anxious about how the Clinton administration would respond to Japanese financial assistance for the project.

Said one senior Foreign Ministry official: “The U.S. may regard possible Japanese cooperation on the railroad project as a bad thing.

“The U.S. may think the project, which will establish a rail link between Iran and its northern neighbors, will eventually help increase Iran’s influence in a region surrounding the Caspian Sea.”

That region, rich in oil and gas, has become the focus of attention in recent years, not only by oil companies but also by the U.S. and some other governments for strategic reasons.

In addition to the U.S., a possible negative response from within the LDP has also made the government reluctant to pledge fresh loans for the Iranian railroad project during Khatami’s visit, government sources said.

Said one government source: “We are now asking Iran not to have Mr. Khatami raise the issue of the railroad project with Prime Minister Mori in order to avoid hurting the otherwise favorable atmosphere surrounding the Iranian leader’s visit.”

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