South Korean companies, led by construction firms, refiners and automakers, are expecting to expand their presence in Iran after economic sanctions on Tehran are lifted, industry sources said Tuesday.
Over the weekend, the U.N. nuclear agency said that Iran has met all of its commitments under last summer's landmark nuclear deal to crimp Tehran's ability to make atomic weapons. For Iran, the move lifts Western economic sanctions that have been in place for years, unlocking access to frozen assets and resuming energy exports.
Iran holds the world's fourth-largest oil reserves and the second-largest gas reserves, but international sanctions have stymied progress across its energy sector.
Local construction companies have pinned hopes on new projects as Iran is set to make big investments to replace aged gas and oil facilities and major infrastructure, providing a slew of business deals to foreign firms.
Analysts said a series of construction and infrastructure projects may be up for grabs for South Korean firms.
In the past decades, South Korean builders had clinched deals worth US$12 billion with Iran, but since 2009 there have been few deals due to the economic sanctions that the United Nations imposed for its nuclear weapons program in 2010.
"Until 2000, Iran was the fourth-largest market for South Korean construction firms after Saudi Arabia, Libya and Iraq ... the lifting of economic sanctions would pave the way for South Korean firms to tap deeper into the nation," said Kim Jong-kuk, manager of the Middle East division at the International Contractors Association of Korea.
The Export-Import Bank of Korea projected Iran's construction market to reach $49.6 billion this year, up from last year's $46.1 billion.
Steelmakers and automakers may be in line to benefit from the lifting of the economic sanctions as Korean steel plates would gain a footing in Iran as automakers there import a huge chunk of parts.
According to Kiwoom Securities, South Korean products accounted for
24.3 percent of Iran's auto steel sheets in 2012, but its share fell to 15.7 percent in 2013 due to the economic sanctions.
South Korean refiners are also expecting to diversify their import lines, which would eventually help them improve their earnings. Only two refiners -- SK Innovation Co. and Hyundai Oilbank Inc. -- are importing Iranian oil, but they would increase imports of Iranian oil with prices $2 or $3 lower than other sources of crude oil.
Their combined imports in 2011 reached 87.18 million barrels worth $9.2 billion, but tumbled to 44.92 million barrels worth $4.5 billion in 2014, according to industry data.
Automakers and electronics firms are forecast to enjoy steady demand for autos there. Hyundai Motor Co. and its smaller affiliate Kia Motors Corp. exported 22,734 units to Iran in 2010, but shipments to Tehran have been suspended after 2011.
Industry sources said the lifting of sanctions on Iran may increase orders for offshore facilities, which will serve as a boon for South Korean shipyards currently struggling with mounting losses.
"It (the lifting of Iran sanctions) could add more barrels to the global oil market, but demand for tanker ships and LNG carriers may increase, which is good for Korean shipyards," said Hong Sung-in, an analyst at the Korea Institute for Industrial Economics and Trade.
Airlines are also positioned to benefit from low oil prices as Iran's crude oil would flow into the global market, further driving down already low oil prices. (Yonhap)
