Petrochem Revenues Blocked in S. Korea

Petrochem Revenues Blocked in S. KoreaPetrochem Revenues Blocked in S. Korea

Billions of Iranian export earnings have been blocked in South Korea despite the easing of international sanctions against the petrochemical industry, head of Petrochemical Employers Association said.

Despite the sanctions relief billions of dollars of hard currency earned by petrochemical exports are blocked in South Korea, as "Koreans are claiming they have not as yet received the circular on sanctions relief," Mehr news agency quoted Ahmad Mahdavi as saying.

Petrochemical production capacity should have reached 60 million tons per annum by the end of the Fifth Five-Year Development Plan (2011-2016). Currently only 45 million tons of petrochemicals are produced annually. "This contradicts the development plan," Mahdavi complained.

During the past years, crude production and exports on average generated $100 billion revenues annually, which could be utilized to expand infrastructure. "The substantial amount of oil revenues were never brought into service of production and industry," Mahdavi noted. Calling for a long term formula for petrochemical feedstock, the official said one of the main reasons Indian and Omani investors left Iran's petrochemical industry was the uncertainty over a long term price formula for feedstock.

The US and the European Union began tightening sanctions against Iran's banks and oil industry in 2010 amid suspicions that Iran's nuclear program had military aims. Tehran insists the program is peaceful.

The US and its allies agreed to ease some sanctions for an interim period, ending November 24, before they reach a comprehensive agreement on Iran's nuclear program. The relaxation includes suspending an EU insurance and reinsurance ban that barred most international tanker owners from getting coverage to carry Iranian oil. European and US companies can again purchase Iranian petrochemicals under the interim deal.

However, Mohammad-Hasan Peyvandi, vice president of National Petrochemical Company said in August that the short window for sanctions relief has made it harder to benefit from the eased restrictions on chemical sales and banking. "There are problems with exporting petrochemicals, but they relate to insurance issues."

Transferring payments and insurance for exports remain the biggest hindrances for petrochemical producers, according to Peyvandi. Interim sanctions-relief measures give Iran’s petrochemical sector a needed boost. But broader relief from restrictions on western investment in Iran is likely required if the country is to meet its long-range production and export goals.