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Iraq keen to rekindle Japan ties, but firms wary
* Iraq keen on Japan firms, brand image popular among Iraqis
* Japanese oil firms accept risk, but others wary
By Mohammed Abbas
BAGHDAD, Dec 22 (Reuters) - Baghdad has long called for foreign firms to help rebuild Iraq, but in a country where the word "Japanese" is a byword for high quality, companies from Japan are especially dear to Iraqi hearts.
Japan was a top Iraqi trade partner before years of war and sanctions, and Japanese engineering still commands a premium in Iraq even as Korean and Chinese products make inroads elsewhere.
But while a semblance of normality returns to Iraq, bombings and other security concerns still hold back traditionally cautious Japanese firms -- to the annoyance of Iraqis.
"They are a little upset at the hesitance of Japanese companies," Gotaro Ogawa, Tokyo's ambassador in charge of reconstruction assistance to Iraq, said at an Iraq-Japan forum this week.
Iraqi officials warned delegates from companies like Nippon Oil Corp 5001.T, Mitsubishi Heavy Industries (7011.T) and Sumitomo Corp (8053.T) that delays in coming to Iraq, home of the world's third largest oil reserves, would "cost them a lot".
But the fact that sniffer dogs checking for explosives patrolled the venue at Baghdad airport and most attendees were set to fly out the same day spoke volumes about security issues, even though holding the forum in Iraq at all was a step forward. Last year's session was in neighbouring Jordan.
The one deal announced was tiny relative to the requirements of a country in need of multi-billion dollar projects to rebuild its tattered infrastructure.
"We can provide equipment and material. But we will not be coming to Iraq. So far, we cannot go," said Makoto Yokotsuka of Marubeni Corp (8002.T), which signed a deal for a project worth up to $200 million to rehabilitate a cement factory in Iraq.
Mitsubishi also has a deal to supply equipment and expertise for a $200 million Iraqi fertilizer plant project
"Engineering and procurement is the most comfortable for us. The construction is up to Iraq," Mitsubishi executives said.
OIL THE EXCEPTION
Japanese oil firms have been the notable exception.
Japan Petroleum Exploration Co (Japex) (1662.T), partnered with Malaysia's Petronas, on Monday signed an initial deal with Iraq to develop the Gharaf oilfield, one of several oilfield development contracts auctioned by Iraq this year.
A Nippon Oil-led group is in talks with Iraq to develop the Nassiriya oilfield. Iraq has some of the world's largest untapped oilfields with reservoirs among the easiest to access.
"Frankly speaking, upstream companies don't hesitate to take on the current risk. That's why we're approaching many channels to get in contact with the oil ministry to do business," said a Japanese oil company executive who declined to be named.
Kuni Miyake, of AOI Group's foreign policy institute, who had come to Iraq with an oil firm, was also frank.
"If you don't take a risk, you don't make money," he said.
An official from Japanese state-affiliated firm Japan Oil, Gas and Metals National Corporation said there had been unofficial talks with Japex on the possibility of financial support for the Gharaf venture to dilute Japex's risk exposure.
Japex is also trying to minimise physical risk. Huge bomb attacks have killed hundreds in Baghdad in recent months.
"We are contracting security firms with Petronas. After we receive their reports about security in Iraq, we will ... decide on how to proceed on timing," Katsuo Suzuki, a Japex Executive Vice President, said at the oil ministry's Gharaf signing event.
ELECTIONS AND CULTURE
A key indicator for Japanese firms will be Iraq's March 7 parliamentary elections. Some fear violence could spike before the polls, and afterwards businessmen will be anxious to see whether recently awarded oil deals hold under a new government.
"To be frank, at this moment we don't have enough confidence, but the security situation is improving ... The elections will be the milestone," a Japanese financial services company executive said, declining to be named.
In the meantime, Japanese firms, lauded in Iraq for their workmanship, are reluctant to hire foreign workers to minimise risk, precisely to protect their brand image.
"Japanese companies have a high brand image they want to maintain, so they are more hesitant to use third country workers for now," a Japanese official who declined to be named said. (Additional reporting by Ahmed Rasheed, writing by Mohammed Abbas: Editing by Missy Ryan and David Cowell)
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