South Korea is the latest nation to raise its stake in the Iranian economy, pledging €5 billion to projects in the country.
The deal follows similar agreements between Kexim—South Korea’s export credit agency—and the Iranian government worth €8 billion, and according to sources in Iran, takes Korea’s exposure in Iran to over $13 billion, Global Trade Review reported.
South Korea is keen to invest in Iran’s auto industry, its tourism sector and energy projects. Seoul already relies on energy imports and has automotive factories scattered throughout Asia, building Hyundai, Kia and other Korean-branded vehicles for local consumption.
The South Korean Trade Ministry expects annual bilateral trade will rise by $11 billion from 2012 levels over the next two years.
Industry and Energy Minister Joo Hyung-hwan says: “We maintained our relations with Iran during the sanctions and we are willing to start a new phase of co-peration in the post-sanctions era.”
Despite close ties to the US and EU, South Korea has always pursued an independent diplomatic approach to Iran, particularly on trade terms. Iran remains its third-largest export market in the region and last year, Kexim voiced hope that Korean firms could be involved in energy projects nearing $60 billion in value.
The countries also agreed to a maritime pact covering shipping and fisheries. This will allow ships from each respective nation freer passage through the other’s waters and may also allow Korean firms–which have renowned expertise in maritime projects—access to a host of initiatives expected to be soon announced by the Iranian government.
Steel giant POSCO has already signed a memorandum of understanding to help construct a $1.6 billion steel mill in Iran’s southeasterly port, Chabahar. The company hopes to break ground on the project in 2017, with a view to producing cold-rolled and galvanized steel by 2019, Iranian press reports.
Chabahar is a strategically important Iranian port, providing its best access to the Indian Ocean. Plans are afoot to create a major trading hub in the vicinity.
Exports Down
South Korean exports in February decreased by 12.2% from a year earlier in their 14th consecutive month of year-on-year declines, the longest slump in the country’s modern history, according to a monthly trade report released on Tuesday by the Ministry of Trade, Industry and Energy.
The drop is due to lower oil prices and the weakening global economy, especially China. Exports to the second biggest economy decreased 12.9% in February from a year earlier, which is worrisome for South Korea as China has been its biggest trade partner since 2004, contributing some 25% of its total exports, reads an article by Forbes.
With China’s slowdown expected to continue to slow down, South Korea is looking for other trade partners. One of them is the second largest economy in the Middle East, which recently had its sanctions lifted—Iran.
Iran and South Korea have a healthy trade relationship and recently rolled out new initiatives to further develop their partnership.
On Monday, Korea Trade Promotion Corporation (KOTRA) and Iran Trade Promotion Organization (ITTO) signed on a memorandum of understanding, usually the first stage in the formation of a formal contract, for promoting bilateral trade.
