Russia in zinc mining deal with Iran

Reuters - Russia has agreed to develop an Iranian zinc deposit that is among the largest in the world in a deal involving an Iranian bank facing international sanctions, its Energy Ministry said on Tuesday.

The agreement to develop the Mehdiabad zinc and lead deposit was reached at a trade meeting on Sept. 11 that brought Russia's Energy Minister Sergei Shmatko to Iran, the ministry said in emailed comments.

Russia, whose biggest gas firm once withdrew from Iran's energy sector due to tightening international sanctions, built the Islamic state's Bushehr nuclear power plant, which joined the grid earlier this month.

"The parties agreed to develop cooperation on a project involving the construction of a mining plant and exploitation of the Mehdiabad zinc and lead deposit," the ministry said.

Citing a source close to the talks, popular business daily Kommersant said the project's cost was estimated at $1 billion-$1.2 billion.

The deal calls for a joint venture linking state conglomerate Russian Technologies, Russian firm KAPSAD international and Iran's Saderat Bank, which faces U.S. and United Nations sanctions.

Kommersant said the deal was being shepherded by powerful Deputy Prime Minister Igor Sechin.

The source said Iran was insisting on participation of the state-owned export-focused Saderat Bank, which was named in a 2008 U.N. Security Council resolution, approved by Russia, that tightened sanctions on Tehran for its nuclear activities.

The Security Council urged states to "exercise vigilance" over the bank's activities abroad to avoid contributing to "proliferation-sensitive nuclear activities, or to the development of nuclear weapon delivery systems."

Two years earlier, the United States had barred the bank from any direct or indirect dealings with U.S. institutions citing it as a "significant facilitator" of the financial activities of the Islamist group Hezbollah.

Veto-wielding permanent member Russia has backed four successive rounds of Security Council sanctions against Iran over its nuclear programme, which Western nations fear is aimed at acquiring weapons.

But it has worked with China to water down the resolutions and has criticised additional sanctions imposed by the United States and European Union, saying they could undermine efforts to persuade Iran to rein in its nuclear activities.

While Russia is a member of the six-nations seeking to engage Tehran on its nuclear programme, it has warmer ties with Iran than Western nations do. Its state-run gas giant Gazprom said last week it may take part in developing an Iranian oil field.

Under the U.N. resolution, vigilance over the bank's activities is limited to its activities abroad, limiting the scope for opposition to the reported project.

Deposits at the Mehdiabad reserve, near Yazd in central Iran, amount to 394 million tonnes of zinc, lead and silver, it said.

Development rights until recently belonged to Mehdiabad Zinc Co, which had Australian partners, but the report said that its licence had been recently revoked.