An Indonesian businessman buying an expensive carpet at a store at Tehran's Esteghlal Hotel asked the owner if he could pay by credit card, and the answer was "No".

The businessman ended up paying for the carpet in cash, about US$1,500, although, if he had wished, he could have paid a few hundred dollars as a down payment and then transferred the rest to the store owner's bank account in Dubai.

This is a typical difficulty faced by Iranians doing business in their own country. The problem basically stems from the limited links between Iranian banks and their overseas counterparts as a result of economic sanctions by the United States and now additional sanctions by the United Nations.

It is exactly this problem that has hampered trade between Indonesia and Iran. Because of this problem, many Indonesian businessmen do business with their counterparts in Iran through a third country, like the United Arab Emirates.

This increases costs and complicates business transactions, according to MS Hidayat, chairman of the Indonesian Chamber of Commerce and Industry.

"How can we increase our business with Iran if our businessmen cannot even open a letter of credit to import goods from or export goods to Iran," Hidayat said.

As a result, bilateral trade between Indonesia and Iran has remained minimal over the past five years. According to data from Iranian customs, total bilateral trade in the 2004/2005 fiscal year reached only US$323 million, with Indonesia enjoying a surplus of $53 million. According to Indonesian data, bilateral trade increased 22 percent to more than $400 million last year.

Indonesia's exports to Iran include palm oil, paper, textiles and textile products, wood and rubber. Indonesian imports from Iran include aluminum, steel, liquefied petroleum gas, ethylene, carpets, handicrafts and nuts.

Trade Minister Mari E. Pangestu said the trade figures would be higher if Indonesia included indirect exports to Iran via a third country like the United Arab Emirates.

She said the absence of banking links complicated efforts to improve bilateral trade, but she remained optimistic, considering the rising demand in Iran for Indonesian consumer products.

Now, with the visit of President Susilo Bambang Yudhoyono to Iran, the countries have committed to boosting bilateral economic ties, especially in the energy sector, including building a $6 billion refinery in Banten, with Iranian participation and supplies of crude oil from Iran.

The National Iranian Oil Refining and Distribution Company and Indonesian state oil firm Pertamina will each take a 40 percent stake in the refinery, with the remaining 20 percent going to the Petrofield Refining Company of Malaysia.

When completed, the first stage is scheduled for completion in 2012, the refinery will have a total processing capacity of 300,000 barrels of crude oil per day, with half to be supplied by Iran.

Indonesia's state-owned fertilizer company PT Pusri plans to build a fertilizer plant in Iran to benefit from the low cost of natural gas in the country. Some of the fertilizer produced at the plant would be exported to Indonesia.

Despite the ambitious plans, implementation is uncertain because of the new sanctions imposed on Iran by the United Nations Security Council, which Indonesia did not support.

All 14 other countries on the council, including Iran's close allies Russia and China, voted in favor of the new sanctions, which make it harder for foreign companies to do business with Iranian companies and individuals.

Speaking to Indonesian journalists Tuesday night, President Yudhoyono said the government had considered all factors, including the UN sanctions, in pursuing increased relations with Iran in the energy sector.

"We have considered everything, and we are convinced that what we are doing is pure energy cooperation, and has nothing to do with nuclear energy, and therefore we can proceed with this," Yudhoyono said.

"About the special nature of Iranian financing, it has also been considered. We are working on a framework, and it is our hope that both parties can discuss the details so that everything will be workable and feasible."

Indonesia is also considering boosting tourism cooperation with Iran, with possible direct air links between the two countries.

The absence of air links has kept travel between the two countries very low. The Indonesian Embassy in Iran issues an average of 500 visas to Iranians per year.

To boost tourist visits, Indonesia and Iran also agreed to provide on-arrival visas for visitors from the other country.

Yudhoyono described his state visit to Iran more as an effort to improve bilateral relations, especially in the economic sector, not as a "declaration of war against the West".

"Similarly, when I visit Western countries, it doesn't mean that we are in confrontation with Iran. My visit to Iran is based on the principles of our free and active foreign policy," he said.

Whatever it is, Indonesia is rightfully trying to exploit all the opportunities arising from its abstention from the vote at the UN Security Council on sanctions against Iran. Now it is getting more than just praise from the Iranian government, with a refinery project, an upstream oil industry project and most likely increased trade with this long-forgotten country so full of potential.

The author is a staff writer at The Jakarta Post.

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