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Soviets, U.S. Company Agree on Technology Venture

April 11, 1988

MOSCOW (AP) _ Officials of Honeywell Inc., and a Soviet government ministry announced Monday they had agreed on a multimillion-dollar venture to equip Soviet fertilizer plants with high-technology production control equipment.

The deal was announced as a group of 400 Americans led by Commerce Secretary C. William Verity arrived for trade talks with Soviet officials.

Prospects for more such joint projects, which the Soviets are promoting to help stimulate their economy, are a main topic for the talks of the U.S.-Soviet Joint Commercial Commission.

Honeywell and the Soviet Ministry of Mineral Fertilizer Production are forming a company that will design automated control systems for factories under the ministry’s jurisdiction and is expected to sell to third countries as well, said James Verrant, a Honeywell senior vice president.

The Soviets hope to boost their fertilizer production by using the new technology, thereby also improving harvests in the weak farm economy.

Honeywell will own 49 percent of the company and the Soviet ministry will own 51 percent, Verrant said. The company has been named Sterch, after an endangered species of Siberian crane that was saved by U.S.-Soviet cooperation in the 1970s.

A Honeywell statement said the company’s investment in the initial marketing and design phase will be about $1 million. Verrant told a news conference that once the joint venture begins installing the production control equipment, purchases from Honeywell ″could reach somewhere in the neighborhood of $20 million volume″ in the first year of operation.

Because the Soviet ruble cannot be exchanged for hard currency, the method of receiving profits is a major problem for Western firms trying to set up joint ventures with the Soviet Union.

But Verrant said that under Soviet legislation adopted in September, the minister of the Soviet fertilizer industry has access to some of the country’s hard currency earnings.

Honeywell’s future income from the project will depend on increasing the quality and quantity of the fertilizer that can be marketed to third countries, and on installation in other countries of systems in plants that the Soviets have helped manage, Verrant said.

Most of the joint venture’s employees will be Soviets, Verrant said.

The agreement will be signed Thursday and official registration of the company may take a month or more.

Giorgi Prityko, a top official in the Soviet ministry, said Bulgaria’s 10 years of experience with a similar Honeywell system was an important reason the Soviets chose the Minneapolis-based company.

″We just adoped the experience acquired by our friends in Bulgaria,″ he said.

Members of the Joint Commercial Commission are expected to hear from Soviet leader Mikhail S. Gorbachev on Wednesday.

Verity said last week he expects no breakthroughs in the talks, although they could improve the climate for greater U.S.-Soviet trade.

He said he would stress that expanded trade can take place only if the Soviets make improvements in other areas such as human rights and emigration.

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