Iran nuke deal seen to help Korean firms resume biz ties

A landmark deal on Iran's nuclear program is expected to help South Korean companies resume business ties with the oil-rich country and to provide them with new opportunities for growth, analysts said Tuesday.

After drawn-out talks, Iran and six other powers reached the agreement that could lead to the lifting of U.S.-led financial and other sanctions imposed on the Middle East country and end geopolitical uncertainties, which is good news for a trading nation like South Korea.

"Iran is a sizable market that has become off limits to South Korean firms due to sanctions imposed by the international community," a finance ministry official said. "If various restrictions are lifted as a result of the agreement, Iran could become a land of opportunity for local companies."

Before sanctions went into effect, Iran was a key trading partner for South Korea. The country provided crude oil for Asia's fourth-largest economy and was a big market for manufactured goods and local builders.

The official, who declined to be identified, said ending financial sanctions will fuel economic cooperation and trade. He predicted that automobiles, petrochemicals, construction and industrial plant sectors can benefit the most from the lifting of trade embargoes against the Islamic Republic.

In accordance with the United Nations Security Council resolution 1929, Seoul halted all financial transactions with 102 Iranian companies and banks along with 24 individuals in September 2010. Among institutions blacklisted were the Seoul branch of Iran's Bank Mellat.

To handle trade that did not conflict with sanctions, businesses had to use Korean won accounts set up by Iran's central bank with Woori Bank and the Industrial Bank of Korea. Such an arrangement was cumbersome and inconvenient, hurting transactions.

The official, however, cautioned that even with the nuclear agreement, there must be follow-up measures and verification processes that will all take time to sort out.

The source stressed the government plans to keep close tabs on what measures will be taken, speculating that broad economic and financial sanctions may be lifted late this year.

Reflecting this view, a local bank official said, financial sanctions are usually the last to be lifted, making it unlikely that there will be immediate change.

"If restrictions are lifted, however, it can lead to the free movement of capital that can open trade and business opportunities," he said. "The pace of global economic recovery remaining sluggish, Iran can become a good market for South Korean companies."

Experts predicted South Korean construction companies may benefit the most once the sanctions against Tehran are lifted, saying local builders are expecting to resume their suspended business in Iran.

"We have paid close attention to the developments unfolding in nuclear talks as we used to be an old business partner with Iran," an official from GS Engineering & Construction said. "We plan to enter the construction market there as soon as the sanctions are lifted."

Automobile companies also expect to see more business with Iran down the road as they could start selling their cars again in the market.

Hyundai Motor Co. and Kia Motors Corp. sold around 23,000 cars in Iran in 2010 and 12,000 units in 2011, but they have not exported any vehicles since 2012.

If the sanctions are lifted, not just automakers but also many parts suppliers would see their trade with Iran get back to normal, a boost for many of them struggling in the face of falling demand in other export markets, according to industry watchers.

Steel and petrochemical companies are also expected to bask in new business opportunities in Iran.

Steelmaking giant POSCO Co. reportedly is eyeing the export of its Finex technology to Iran when the market is open to foreign exchange. Refineries hope that they could diversify oil supply channels by possibly purchasing Iranian crude, the watchers said. (Yonhap)