Nicaragua Defies Us With Iran Trade Deal

Nicaragua has signed contracts with Iran worth hundreds of millions of pounds in defiance of warnings from the United States.

President Daniel Ortega brushed aside Washington's concerns by agreeing to trade bananas, coffee and meat in exchange for Iranian help with infrastructure projects.

Mr Ortega and Iran's energy minister, Hamid Chitchian, signed the accords in Nicaragua's capital, Managua, on Saturday, cementing Tehran's toehold in what the US considers its backyard.

In return for Nicaraguan agricultural goods, Iran is to help fund a farm equipment factory, 4,000 tractors, five milk-processing plants, a health clinic, 10,000 houses and a deep-water port.

In November Iran is also expected to choose a site for a £59m hydroelectric power station, with another three plants potentially to follow. As the head of a small, impoverished central American state lacking military might, and with his approval ratings slumping, Mr Ortega hardly poses a strategic threat to the US.

However, the Sandinista leader has shown a willingness to defy and irritate the superpower. He has upgraded ties with Cuba and North Korea, and in June visited Iran, Algeria, Libya and Cuba in a jet lent by Libya's Muammar Gadafy.

The Iranian deal was the boldest move yet. Just last week the US ambassador to Nicaragua, Paul Trivelli, made a typically blunt warning: "Iran can be a dangerous partner."

The Bush administration has labelled Tehran part of an "axis of evil" and expressed alarm over its nuclear program and alleged support for Shia militias in Iraq.

Mr Ortega was also in Washington's bad books in the 1980s when he led a Marxist Sandinista government and fought a civil war against Contra rebels, who were sponsored by the US government under Ronald Reagan. A clandestine programme in which US administration officials sold weapons to Iran and illegally used the profits to fund the rebels became known as the Iran-Contra scandal.

Two decades later the Iranian link is boosting, not undermining, the Sandinistas. Mr Ortega badly needs the help. Ousted from power in 1990, he made an electoral comeback last year after ditching Marxism and embracing moderation.

However, his electoral honeymoon has evaporated amid continuing poverty, joblessness and electricity blackouts, with 57% of Nicaraguans complaining that he has failed to keep campaign promises, according to a June opinion poll. The Iran projects address some of those concerns.

Venezuela's radical left-wing president, Hugo Chávez, opened Latin America to Iran by signing multiple accords with President Mahmoud Ahmadinejad, including bilateral deals on oil, tractors and bicycles.

"The Chávez-Ahmadinejad relationship is what drives Iran's role in Latin America, which is fundamentally geopolitical rather than economic," said Michael Shifter, of the Washington-based Inter-American Dialogue thinktank.

Mr Chávez has billed the accords as an "axis of unity" against the US, which he terms the "empire", and has encouraged allies such as Mr Ortega to follow suit.