Iran-South Korea steel deal halted by Saudi influence
Pressure from Saudi Arabia has led to the blocking of an investment deal by South Korea in Iran’s steel industry
Pressure from Saudi Arabia has led to the blocking of an investment deal by South Korea in Iran’s steel industry.
South Korea’s POSCO Engineering & Construction had signed a $1.6bn memorandum of agreement with the Iranian steelmaker, Pars Kohan Diar Parsian Steel (PKP), in May 2016, to build a steel mill in the country’s Chabahar Free Trade-Industrial Zone.
The plant was intended to showcase innovative steelmaking technology, which allows the direct use of cheap iron ore and non-coking coal, resulting in significantly lower operating costs and emissions than a blast furnace.
However, in late 2015, POSCO sold a 38% stake worth $1.1bn in its engineering and construction division to Saudi Arabia’s Public Investment Fund, giving the fund the right to appoint two board members.
As Iranian-Saudi relations grew strained the new board members became less keen on investing in Iran, according to a July 2017 letter sent by a POSCO official to PKP and recently unveiled in the Iranian media.
“This project mandatorily requires the decision of the board of directors. However, as relations between Iran and Saudi Arabia rapidly grew worse after a severance of diplomatic ties last year, outside directors in the board meeting are having negative stances on Iran projects, especially those requiring investment and JVC (joint venture company) establishment,” the letter said.
South Korea, one of Iran’s top trade partners, imposed sanctions against Iranian companies and individuals in 2010 under growing pressure from the US to join sanctions mandated by the United Nations Security Council over Iran’s nuclear energy programme.
The country was quick to repeal them, however, as the sanctions were lifted in 2016 as part of Iran’s nuclear deal – also known as Joint Comprehensive Plan of Action.