By Choi Sung-jin
It is less than a week since Cheong Wa Dae's big media hype over President Park Geun-hye's "sales diplomacy" with Iran, saying it hit a 52 trillion-won ($45 billion) economic jackpot.
But some media reports from the Middle East country show things may not be as rosy as they appeared.
Ali Noorzad, CEO of CDTIC, an Iranian public corporation that builds transport infrastructure, told Tasnim News Agency on Sunday: "According to a memorandum of understanding signed with a Korean consortium, the latter should fulfill its duty to implement the MOU within four months. Otherwise, we are ready to sign a contract with Iran's Khatam-al Anbiya."
He did not elaborate on the obligations the Korean consortium should carry out. The pro-government news agency said the Iranian construction company is owned by Islamic Revolutionary Guards Corp (IRGC), an elite army unit established to defend the Iranian system.
The Iranian official was referring to the project to build the third section of the 121-kilometer expressway that links Tehran to Mazandaran Province in northern Iran. A Korean consortium led by Daewoo Engineering & Construction signed the MOU to design and build roads, tunnels and bridges in the 47-km section, at a cost of 1.75 trillion won ($1.5 billion).
Noorzad's remark might have emphasized the need for the project's speedy progress, but his mention of a specific company that may replace the Korean consortium could raise some controversy, industry sources here said Monday.
Hyundai Engineering and Construction is also yet to sign an MOU for two railway projects - worth $1.7 billion - which the company has sought to win jointly with Hyundai Rotem, its sister company manufacturing railway coaches, in Iran. The projects were also included in President Park's "gift package" to domestic businesses.
"We failed to sign the MOU during President Park's visit to Iran as there arose some difference of views with CDTIC concerning details of the project," a Hyundai E&C official said. "As the Iranian side has strong intentions to promote the project, we are planning to resume negotiations and sign the MOU soon."
There still remain possibilities Korean companies will win orders for these projects. But three out of seven projects related to roads and railroads that Cheong Wa Dae said Korea had secured appear to have hit a snag, indicating the process will not be easy, the industry sources said.
Park's critics point out other problems, too, in turning the much-trumpeted "second Middle East boom" into reality.
Foremost are diplomatic risks if Iran backs away from its agreement with the P5 plus 1 group to denuclearize itself by 2025. If Tehran nullifies the accord, that will automatically invoke the "snap-back" clause, reviving sanctions on the country and dealing huge blows to Korean companies operating in the country.
Various geopolitical risks, such as Iran's rivalry with Saudi Arabia over the hegemony of the Islamic world, and the power struggle between liberal reformists and hard-line conservatives within Iran, will always remain to keep Korean businesses there nervous, the critics said.
As President Park's chief economic secretary, Ahn Jong-beom, said: "All business deals accompany risks."
But one of the government's roles is to minimize such risks. "Can the Park administration take the responsibility if Korean businesses, especially small and midsize firms, suffer damage because of political risks in Iran?" said Professor Moon Jung-in of Yonsei University in a recent contribution to a vernacular daily.
Of the total $45 billion of orders Korean businesses have reportedly won, the Export-Import Bank of Korea and the Korea Trade Insurance Corp. will shoulder the financing of $25 billion, even more than the $20 billion in project financing committed by China during President Xi Jinping's visit to Iran in January, Moon said.
"Sales diplomacy by top leaders can always turn into shackles," Moon said. "The government should have exercised more caution and found ways to minimize risks, instead of hurrying to demonstrate diplomatic accomplishments to the domestic audience."
It is less than a week since Cheong Wa Dae's big media hype over President Park Geun-hye's "sales diplomacy" with Iran, saying it hit a 52 trillion-won ($45 billion) economic jackpot.
But some media reports from the Middle East country show things may not be as rosy as they appeared.
Ali Noorzad, CEO of CDTIC, an Iranian public corporation that builds transport infrastructure, told Tasnim News Agency on Sunday: "According to a memorandum of understanding signed with a Korean consortium, the latter should fulfill its duty to implement the MOU within four months. Otherwise, we are ready to sign a contract with Iran's Khatam-al Anbiya."
He did not elaborate on the obligations the Korean consortium should carry out. The pro-government news agency said the Iranian construction company is owned by Islamic Revolutionary Guards Corp (IRGC), an elite army unit established to defend the Iranian system.
The Iranian official was referring to the project to build the third section of the 121-kilometer expressway that links Tehran to Mazandaran Province in northern Iran. A Korean consortium led by Daewoo Engineering & Construction signed the MOU to design and build roads, tunnels and bridges in the 47-km section, at a cost of 1.75 trillion won ($1.5 billion).
Noorzad's remark might have emphasized the need for the project's speedy progress, but his mention of a specific company that may replace the Korean consortium could raise some controversy, industry sources here said Monday.
Hyundai Engineering and Construction is also yet to sign an MOU for two railway projects - worth $1.7 billion - which the company has sought to win jointly with Hyundai Rotem, its sister company manufacturing railway coaches, in Iran. The projects were also included in President Park's "gift package" to domestic businesses.
"We failed to sign the MOU during President Park's visit to Iran as there arose some difference of views with CDTIC concerning details of the project," a Hyundai E&C official said. "As the Iranian side has strong intentions to promote the project, we are planning to resume negotiations and sign the MOU soon."
There still remain possibilities Korean companies will win orders for these projects. But three out of seven projects related to roads and railroads that Cheong Wa Dae said Korea had secured appear to have hit a snag, indicating the process will not be easy, the industry sources said.
Park's critics point out other problems, too, in turning the much-trumpeted "second Middle East boom" into reality.
Foremost are diplomatic risks if Iran backs away from its agreement with the P5 plus 1 group to denuclearize itself by 2025. If Tehran nullifies the accord, that will automatically invoke the "snap-back" clause, reviving sanctions on the country and dealing huge blows to Korean companies operating in the country.
Various geopolitical risks, such as Iran's rivalry with Saudi Arabia over the hegemony of the Islamic world, and the power struggle between liberal reformists and hard-line conservatives within Iran, will always remain to keep Korean businesses there nervous, the critics said.
As President Park's chief economic secretary, Ahn Jong-beom, said: "All business deals accompany risks."
But one of the government's roles is to minimize such risks. "Can the Park administration take the responsibility if Korean businesses, especially small and midsize firms, suffer damage because of political risks in Iran?" said Professor Moon Jung-in of Yonsei University in a recent contribution to a vernacular daily.
Of the total $45 billion of orders Korean businesses have reportedly won, the Export-Import Bank of Korea and the Korea Trade Insurance Corp. will shoulder the financing of $25 billion, even more than the $20 billion in project financing committed by China during President Xi Jinping's visit to Iran in January, Moon said.
"Sales diplomacy by top leaders can always turn into shackles," Moon said. "The government should have exercised more caution and found ways to minimize risks, instead of hurrying to demonstrate diplomatic accomplishments to the domestic audience."
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