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Last Updated: Monday, 27 September, 2004, 18:47 GMT 19:47 UK
Iranian MPs vote for Turkish veto
President Khatami of Iran
President Khatami cancelled a visit to Turkey after the decision
Iran's hardline parliament has approved a law giving it the power to veto two contracts awarded to Turkish companies.

The Majlis assembly may now rescind contracts awarded to two Turkish firms that it has accused of having unacceptably close links with Israel.

One of the firms involved has said it might sue the Iranian government to recover money already invested.

The decision was criticised by reformist President Mohammad Khatami who said it threatened key investment.

Legal threat

The parliament's decision was approved on Monday by the conservative Guardians Council which vets all legislation, the official Islamic Republic News Agency reported.

We cannot attract more foreign investment when we change our rules every day
Iranian government spokesman
Lawmakers have given themselves three months to decide whether to approve the contracts, which would be among the largest foreign investments in Iran since the Islamic revolution 25 years ago.

At risk from the decision are a $3bn licence awarded to Turkcell to operate Iran's second private mobile phone licence and a project to build two terminals at Tehran airport.

Turkish firm TAV, which has already invested $15m in completing one terminal, said it may sue the Iranian government to recover the money if the contract was not honoured.

The firm reached a goodwill understanding with the government that it would operate the terminal.

It also hoped to be involved in a second phase of development with a potential value of $193m.

Under these conditions European companies investing in Iran are in danger
Sani Sener, TAV
However, acting on concerns within the Majlis about TAV's operations in Turkey, Iranian revolutionary guards seized control of the airport in May, the day before flights were due to begin.

"If TAV's activities in Iran are blocked, we maintain our right to open a lawsuit in Iran," said Sani Sener, an executive with the Turkish firm.

"Under these conditions European companies investing in Iran are in danger."

Changing rules

The decision is likely to prove highly embarrassing to President Khatami who has tried to encourage foreign investment in Iran. President Khatami cancelled a visit to Turkey due to begin on Tuesday following the decision.

"We cannot attract more foreign investment when we change our rules every day," said government spokesman Abdollah Ramazanzadeh.

"These changes of rules and regulations overnight cannot guarantee investment. We desperately need investment, internal or foreign."

Iranian lawmakers have claimed that the country's security would be compromised by awarding the contracts since both firms do business in Israel, an enemy of Iran's.

However, the Turkish ambassador to Iran said there was no link between the firms and the Israeli government.

"This issue is really a reflection of Iran's internal politics," said Ambassador Bozkurt Aran.

Iran to vote on investment veto
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11 Aug 04  |  Middle East

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