Venezuela woos Iran on possible alumina investment

Reuters, 06.09.03, 1:41 PM ET CARACAS, Venezuela, June 9 (Reuters) - Venezuela, responding to Iranian interest in buying its bauxite, has proposed setting up a joint-venture alumina plant on Venezuela's Orinoco river, state industrial holding company CVG said on Monday. A spokeswoman for the company, Corporacion Venezolana de Guayana, told Reuters its President, Francisco Rangel, outlined the proposal to Iran's government and aluminum industry during a visit to the Gulf state at the end of May. "The Iranians want to buy bauxite, but (Rangel) explained to them that CVG doesn't want to just sell bauxite," the spokeswoman said. CVG operates Venezuela's state-run aluminum industry located in mineral-rich southeastern Bolivar state. The spokeswoman said Rangel had made clear CVG was only interested in selling bauxite through a strategic alliance with Iran, involving setting up a joint venture in Venezuela to produce alumina which could be shipped to Iran for smelting. "The idea is that the Iranians make the investment in the plant, and then they would be paid back through production," the spokeswoman said. CVG had identified a possible site for the proposed plant at Caicara on the Orinoco river, which would make it easier to transport bauxite from Venezuela's huge Pijiguaos mines. It was not immediately clear what response Rangel had obtained in Iran to his proposal. Iranian embassy officials in Caracas were not immediately available for comment. According to CVG, Iran has plans to increase its installed primary aluminum production capacity to more than one million tonnes in the next 10 years from the current 140,000 tonnes. It is looking for fresh sources of raw material to do this. Venezuela's fiercely nationalist left-wing president, Hugo Chavez, has made clear his government does not simply want to export raw materials. He says he prefers forming alliances with major foreign producers to develop value-added processing, smelting and manufacturing ventures inside Venezuela. As examples of this kind of preferred association, the CVG spokeswoman mentioned existing contracts with Swiss-based Glencore International AG and France's Pechiney <PECH.PA>. Glencore is leading a consortium in a $650 million project to build a fifth production line at CVG's Alcasa smelter. Pechiney is proceeding with a $210 million project to expand production at an alumina plant operated by CVG-Bauxilum to 2.2 million tonnes a year from 1.6 million tonnes. CVG is seeking foreign partners to participate in an ambitious expansion plan that foresees increasing its primary aluminum output capacity by more than 400,000 tonnes to more than one million tonnes at the end of the decade. Since Chavez, a populist former paratrooper, was elected in late 1998, the world's No. 5 oil exporter Venezuela has moved to strengthen ties with states seen as hostile by the United States, such as Iran, Libya, Cuba and previously Iraq, when it was ruled by the now toppled Saddam Hussein. This has irritated Washington, although the United States remains the single biggest buyer of Venezuelan oil.