Korean builders operating in Iran are expected to lose business opportunities and suffer from the stalled financial transactions after major countries recently cut economic ties with the Middle Eastern country.
Following the United States, the European Union expanded economic sanction against Iran on Monday, in an attempt to force Tehran to return to the negotiation table on its disputed nuclear programme.
The broadened sanction prohibits trade in petroleum, banking, shipping, insurance and transportation in addition to nuclear-related industries with European companies.
Firms worry that they won’t be able to get payments of products already exported to Iran as Korean banks have practically stopped all financial transaction with the Persian banks. The Iranian banks were blacklisted by the United States on July 1. Korean banks have voluntarily followed the US government’s actions.
Builders operating businesses are also voicing concerns for they find difficulties with supplying equipment from European countries to their construction sites in Iran. They are also pessimistic about winning new contracts in the troubled country in the future, industry watchers said.
Korean exporters have already expressed concerns over losing business opportunities in Libya due to worsening diplomatic ties between Korea and the North African country.
Korean companies are closely watching the market after it was learned this week that Libyan authorities deported a Korean agent charged with illegal information gathering in June.
Cases of Korean trading firms failing to conclude their financial transaction with Iran are likely to increase, officials at the Korea Trade-Investment Promotion Agency said.
“Bills worth US$900 million to $1 billion are likely to be tied up, considering the due date usually falls between 30 and 90 days,” a KOTRA official said.
Korean companies did not receive payments for bills worth about $300 million last month alone. Bilateral trade volume between Korea and Iran amounted to $4 billion last year, KOTRA said.
Korean carmakers stopped sending shipments to Iran right after the United States imposed economic sanctions against Tehran early this month.
Other auto parts makers are considering not sending products to Iran, saying converting the bills issued by Iranian banks into cash will be difficult.
According to the International Contractors Association of Korea, three Korean builders --Daelim Industrial, GS Engineering and Construction and Doosan Heavy Industries -- are operating six projects worth $1.5 billion in Iran.
Hyundai Engineering and Construction relocated its regional office head to Almati, Kazakhstan, saying it won’t have a chance to win another contract in Iran.
Late last year, GS E&C annulled a 1.4 trillion won ($1.1 billion) plant building project in Iran as it no longer could get an insurance guarantee from the Korean trade insurance agency.
Daelim Industrial, operating four projects in Iran will soon face problems with supplying construction equipment from European countries to Iran. About 80-90 per cent of construction equipment is produced in Europe.
Oil importers are no exception. Iran is an oil exporting country to Korea. Korean oil refiners including SK Energy imported crude oil worth $5 billion from Iran last year.
Electronics firms, however, won’t be affected by the sanction as it does not include restricting exports of electronic goods. Samsung Electronics said it has no problem in operating business in Tehran as it sends money through banks in Dubai.
It is currently exporting a number of electronic goods including TVs, refrigerator and air conditioner to Iran.
