S. Korean Con­struc­tion Firms Hit Hard by Iran Sanc­tions


SEOUL (Dis­patches) - South Korea may have won an ex­emp­tion from the U.S. to con­tinue Ira­nian oil im­ports, but ma­jor con­struc­tion com­pa­nies here are still reel­ing from the re­newed Amer­i­can sanc­tions against Tehran.

Hyundai En­gi­neer­ing & Con­struc­tion (E&C), a busi­ness arm of Hyundai Group, an­nounced on Oct. 29 that it had scrapped a deal with Iran’s Ahdaf In­vest­ment Co. to build a pe­tro­leum re­fin­ing fa­cil­ity in Iran.

The deal was worth $520 mil­lion — about 15 per­cent of the $3.4 bil­lion con­struc­tion project led by Hyundai En­gi­neer­ing con­sor­tium. Hyundai En­gi­neer­ing is an in­fra­struc­ture unit owned by Hyundai Mo­tor Group.

“We had no choice but to can­cel the deal,” Yum Dong-yeon, a spokesman for Hyundai E&C, told Arab News. “We’re just sorry to lose the deal, and it is dif­fi­cult now to an­tic­i­pate if and when we will be able to be en­gaged in Iran busi­nesses again.” The re­main­ing project led by Hyundai En­gi­neer­ing is ex­pected to be nul­li­fied. “It’s im­pos­si­ble now to carry out the deal, as a grace pe­riod of the pre­lim­i­nary con­tract has al­ready ex­pired,” a Hyundai En­gi­neer­ing pub­lic af­fairs of­fi­cial said, ask­ing not to be named.

SK En­gi­neer­ing & Con­struc­tion (E&C) has also been hit by the re­newal of U.S. sanc­tions against Iran. The firm, af­fil­i­ated with South Korea’s third largest con­glom­er­ate SK Group, signed a $1.6 bil­lion pre­lim­i­nary con­tract last year to up­grade a re­fin­ery in Tabriz, some 600 kilo­me­ters north­west of Tehran.

The firm also bagged a $3.6 bil­lion con­tract to build and op­er­ate new power plants in Iran un­der a joint project with Turkey’s UNIT In­ter­na­tional. The con­tract is Iran’s largest pri­vate en­ergy project, to pro­duce com­bined gen­er­a­tion ca­pac­ity of 5,000 megawatts. Dae­lim In­dus­trial is also one of the South Korean con­struc­tion firms that have can­celed projects in Iran. The com­pany re­voked a $2 bil­lion deal in June with an Ira­nian oil re­fin­ing com­pany.

Kim Jong-gook, head of the Mid­dle East and Africa busi­ness bu­reau at the In­ter­na­tional Con­trac­tors As­so­ci­a­tion of Korea, painted a grim pic­ture of South Korean con­struc­tion projects in Iran in the long-term.

“South Korean con­struc­tion firms have al­ready been af­fected by the feud be­tween the United States and Iran be­fore the sanc­tions come into force,” Kim said.

The re­stored U.S. sanc­tions, fo­cused on ban­ning any fi­nan­cial trans­ac­tion with Iran, would hin­der South Korean firms from go­ing ahead with any con­tract with Tehran, he said.

“For South Korean con­struc­tion com­pa­nies, Iran is re­garded as a new mar­ket with great po­ten­tial,” Kim said. “As Iran’s oil ex­ports are to be re­duced in the af­ter­math of the re­stored U.S. sanc­tions, en­ergy cor­po­ra­tions of the Mid­dle East na­tion will likely suf­fer the short­age of for­eign ex­change, which will lead to the shrink­age of their con­struc­tion projects.”

Oil re­finer­ies and petro­chem­i­cal firms in South Korea breathed a sigh of re­lief about the “tem­po­rary waiver” for Ira­nian oil im­ports, but braced for risks down the road.

As one of the eight coun­tries ex­empted from the U.S. sanc­tions, South Korea is al­lowed to buy Ira­nian oil over the next six months on the con­di­tion that the im­ports vol­ume should be re­duced sig­nif­i­cantly. Any pay­ment must be made through a bi­lat­eral Korean won cur­rency ac­count. The South Korean gov­ern­ment did not dis­close the scale of re­duc­tion in Ira­nian oil im­ports, but oil re­fin­ery in­dus­try sources es­ti­mate that they are al­lowed to im­port about 4 mil­lion bar­rels per month, more than half of last year’s im­ports vol­ume. South Korea im­ported an av­er­age of 12 mil­lion bar­rels per month of crude and con­den­sate from Iran last year, ac­cord­ing to the state-run Korea Na­tional Oil Corp.

South Korea in par­tic­u­lar is a large buyer of Ira­nian con­den­sate, a su­per light form of crude oil used by its large petro­chem­i­cal in­dus­try. Of the Ira­nian oil im­ported last year, con­den­sate ac­counted for some 70 per­cent.

The South Korean gov­ern­ment is seek­ing to come up with mea­sures to min­i­mize the im­pact of the US sanc­tions on Iran.

“We’ll keep dis­cussing with the United States and Iran over mea­sures re­lated to the sanc­tions and their ef­fects on the Korean in­dus­try,” said Kim Jang-hee, head of the Min­istry of Trade, In­dus­try and En­ergy’s Amer­i­cas Divi­sion.

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