Recent announcements of an investment of US $ one billion by Iran in Sri Lanka and a two-day state visit by Iranian president demonstrated the growing ties between Sri Lanka and Iran.

According to Sri Lanka’s Petroleum and Petroleum Resources Development Minister A.H.M. Fowzie, Iran, the largest provider of crude oil to Sri Lanka, will increase its investment in the expansion project of an oil refinery in Sri Lanka.

Fowzie in an interview with Japanese news agency Kyodo on Wednesday said: "Iran's President Mahmoud Ahmadinejad has allocated this amount which would cover 70 per cent of the required investment for the refinery's expansion, in the form of a 10 year loan, with a five year exemption period from payment of the loan's installments."

Fowzie added: "Iran had earlier too provided the oil we need free from interest for four months."

Fowzie said the project would yield noticeable benefits for its investors. He said: "From the economic point of view my affiliated ministry too is interested in making investments there."

Managing Director Ceylon Petroleum Corporation (CPC) Ashantha De Mel commenting on the investment said that the pilot study for increasing the production of Sri Lanka's only refinery from 50,000 to 100,000 barrels per day has been completed by Iranian oil engineers.

De Mel added: "Iran would make the major part of the required investment for expansion of this oil refinery (70 per cent) and the CPC would cover the rest (30 per cent)."

De Mel who visited Iran in early April 2008, expects the project's executive phase to begin within the next three to four months. Oil experts predict that Sri Lanka's oil refinery would increase its production after the Iranian oil engineers would end their work within the next two to three years.

Reflecting the growing trade and political ties between the two nations, Iranian President Ahmadinejad is making a two-day state visit to Sri Lanka from April 28 on an invitation from President Mahinda Rajapaksa.
“We are privileged to have him as this is his first Asian tour,” said Deputy Foreign Minister Hussain Baila.

Among the projects to be launched by the Iranian president is the Uma Oya hydropower project at Wellawaya in Monaragala district, Baila said, adding Iran had agreed to grant $450 million for it. The project has been estimated to produce 100 MW of electricity and supply water to agricultural and industrial sectors.

Ahmadinejad is also expected to enter into an agreement with his Sri Lankan counterpart for modernizing the Sapugaskanda oil refinery, Sri Lanka’s lone enhancing project. The refinery is to handle Iran’s light crude.

“We have friendly relations with all the nations and Iran is one of our best friends,” Baila stressed.

Following the Rajapaksa’s visit to Tehran in November 2007, Iran agreed to invest 1.9 billion dollars in Sri Lanka’s projects.

The Iranian president’s visit comes at a time when US President George W. Bush and British Prime Minister Gordon Brown have said they are working to extend sanctions against Iran’s nuclear programme.