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Iran Economy Update
Issue 19/2017 SUNDAY FEBRUARY 12TH
Tasnim News:
Korean Ambassador’s prediction of Iran’s auto industry: a serious rival is emerging The 4th Iran Automotive Industry International
Conference (Feb 12-13) was inaugurated on Sunday in Tehran Milad Tower International Center. Tasnim news agency, along with a string of other local media outlets, has picked the remarks of South Korean ambassador to Tehran in his address to the conference where he said that “I think this is a diplomatic conference. We want to establish strong relations between the two countries. This is an untapped 80-million strong market and we should think about this capacity.” According to Tasnim, Ambassador Kim Seung–Ho said that
“Iran’s industrial capacities indicate that we can manufacture a complete car in this country.
This country is famous for the Persian cat the capacity of which should be exploited.”1
Addressing the participants at the conference, the Korean ambassador said “your presence in Iran may be fraught with risk but you should not stop your cooperation because Iran will soon find its position in the automobile industry.” “Iran is not a place for selling cars and auto parts.
This country will turn into a serious rival in the future,” he said. The Korean ambassador said that the Iranian car manufacturing companies will in future move forwards shoulder to shoulder with the European ones. “Of course I should emphasize that development and progress is meaningless without competition. Hadn’t the European and American carmakers compete with each other, they wouldn’t have certainly developed,” he added. Khabar Online has quoted the ambassador as saying that “we should not waste time any more. Sooner or later, Iran’s automobile industry will become powerful with the capacities of Iranian and foreign car manufacturing companies.”
Of note, the ambassador’s remarks have vastly been covered by Iranian official news agencies including IRNA (here), Mizan Online, affiliated with the Judiciary (link here), Khabar Online (click here), Mehr news (link), IRNA (click here), Fars news (link here), ISNA (link), and ILNA (link).
IRNA wrote that executive directors of big European and Asian car companies including Peugeot Citroen, SCANIA, and Renault are present in this event. On the sidelines of the conference, an exhibition participated by domestic and foreign automakers as well as expertise
1 Note: some concepts may have been lost or twisted as what have been brought here are the re- translation to English of the remarks that were originally made in English and then translated by the local media Farsi
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workshops are being held. Sassan Ghorbani, the secretary of the conference told reporters last week that car manufacturers from France, Turkey, Germany, Spain, Italy, Japan, Korea and China have attended the event.
In an address to the inauguration ceremony, IDRO Managing Director Mansour Moazzami said that six automobile sector contracts will be finalized by the end of this Iranian year. “In the new contracts we’ve signed, at least 40% of the vehicle production should be localized and the figure should reach 60-70 percent.” “In the first half of the next [Iranian] year (from 21 March to 21 Sept), the first [joint] products of Saipa-Citroen will be produced. In regards to the IDRO-Renault agreement, I should say that by the end of 2017 or in early 2018, their joint production will start.
Also, Volkswagen and Hyundai have signed agreements that are at the stage of finalization. In total, I should say that six contracts will be finalized by the end of 1395 (20 March),” said Moazzami, according to Tasnim News Agency.
Moazzami said that the country’s car production will reach 1.3 million units this year, indicating 40% increase compared with the last year. He said that all foreign countries can cooperate with Iran in auto manufacturing but reiterated that we don’t allow them to only think about exporting products to Iran. Rather, “they should make investment and manufacture car inside the country.”
Which foreign companies have signed petrochemical sector agreements with Iran?
Last week, NPC Managing Director Ms. Marzieh Shah-Daie declared that this industry needs some $55 billion in investment and that negotiations are being held with a number of foreign companies. The Iranian Student News Agency (ISNA) has published some details of the foreign companies that have engaged or shown interest in participation in this sector.
Agreements with foreign companies in 2015
Company Document
type Purpose of Agreement Total
(France)
MoU Conducting studies for implementing a project with the Iranian Persian Gulf Petrochemical Industries Company Linde
(Germany)
MoU Evaluating implementation of air separation plants plus technology transfer and financial facilities
BASF (Germany)
MoU Conducting studies for joint investment with the Persian Gulf Petrochemical Industries Company for implementing and funding a big petrochemical plant
MITSUI (Japan)
MoU Conducting feasibility study for implementing centralized utilities and the 2nd phase of Assalouyeh and providing finance facilities by JBIC Bank
SERCOBE (Spain)
MoU Evaluating the forms of cooperation and provision of equipment and technology know-how by the Spanish banks and companies based on Corporate Guarantee
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Agreements with foreign companies in 2016
Company Document
type Purpose of Agreement SOJTZ
(Japan)
MoU Feasibility study for joint GTPP2 project
HYUSUNG (Korea)
MoU Feasibility study for implementing joint PDH3/PP project in Iran
Shell
(Netherland)
MoU Studies and evaluating investment in Iranian petrochemical projects and using technology know-how with priority given to GTL4 projects
Talks with foreign banks/financial institutions to finance projects
Bank/Financialinstitution Details of the negotiations
DZ Bank (Germany) Talks over insurance converge based on corporate guarantee KFW Bank (Germany) Talks over insurance converge based on corporate guarantee Hermes (Germany) Talks over insurance converge based on corporate guarantee JBIC and NEXI (Japan) Allocating a LC based on corporate guarantee and supplier’s
credit structure Danish and British
Embassies commercial offices in Tehran
Inviting their banks and ECAs5 to get familiar with Iranian petrochemical plans and establishing a financial structure without government guarantee
Marubeni (Japan) Evaluating short-term finance contracts worth 320 million euros based on Corporate Guarantee in cooperation with the Iranian Persian Gulf Petrochemical Industries Company (the contract has been finalized and effective)
ITUCHU (Japan) Evaluating short-term finance contracts worth 320 million euros (which can be increased to 640 million euros if necessary) based on Corporate Guarantee in cooperation with the Iranian Persian Gulf Petrochemical Industries Company
Japanese financial institutions
following up barriers for implementing a 10 billion euro line of credit already agreed by the Iranian ministry of Economic Affairs &
Finance and Japanese ministry of Economy, Trade & Industry
Industry minister says $8.5bn foreign investment have been finalized post-sanctions Minister of Industry, Mine & Trade Mohammadreza Nematzadeh said that since the implementation of the nuclear deal last year, more than $8.5 billion investment has been attracted into the country of which $5.5 billion has been in the industrial and mineral sectors, ISNA wrote on Saturday. The minister did not provide more details about the countries and the projects they have finalized investment so far.
Swedish high profile delegation arrived in Iran on Saturday
Sweden’s Prime Minister Stefan Löfven, accompanied by a large-numbered delegation comprising cabinet ministers and representatives of 70 companies including SCANIA, Volvo,
2 Gas to Poly Propylene
3 Propane Dehydrogenation
4 Gas to Liquid
5 Export Credit Agencies
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Tetra Pak, Ericsson, arrived in Iran on Saturday morning. ABB Group, the Swedish Association of Steel & Metal Industry, Sensys Gatso Group, Danske Bank, EKN (export credit agency), the Swedish Energy Agency, Swedish Environment Protection Agency, and the Swedish Post &
Telecom Authority were some other members of the Swedish delegation visiting Tehran.
This is the first official visit of a Swedish prime minister to Iran. The most important issue that seems to have been put on schedule to address during this trip is establishing bilateral banking relations. The meeting among the Swedish delegation and Iranian officials took place at the highest level of state and during his trip, Löfven met with Iran’s Supreme Leader Ali Khamenei, President Hassan Rouhani, Parliament Speaker Ali Larijani, and Minister of Foreign Affair Javad Zarif. Supreme Leader Ali Khamenei told Löfven on Saturday that in view of Iranian people, Sweden is a “reputed” country. He welcomed improving bilateral relations. Also, President Rouhani has said that the two countries “are to revive their bilateral relations to the pre- sanctions levels, especially in the area of export guarantee fund and reestablishing banking relations.” Describing the purpose of his trip to Iran, Stefan Löfven has said that “the level of this delegation indicate the importance of relations with Iran for us. We also discussed regional and human rights issues.” Five MoUs on general issues including modern technology, higher education, road construction, IT and women & family affairs were signed while details are not available yet. According to IRNA, Iran was the 21st exporting country to Sweden in 2003 but since 2005 it has fallen out of the first 30 exporting countries to this European country.
In order to have a better judgment about the change in the value and volume of Iran-Swedish trade in the past couple of years, it would be helpful to compare some figures that are summarized in the following table:
2001 2004 2014
Exports Imports Exports Imports Exports Imports Iran-
Sweden 8.931 377.265 15.046 1046 15.185 346.583
Note: Figures are in million US dollar
As the table shows, Iran’s imports from Sweden which had surged from about $377 million in 2001 to more than $1 billion in 2004, dropped to about $346 million in 2014. Also, the value of Iran’s non-oil exports to this European country has remained constant in the past decade and didn’t go beyond the limited amount of about $15 million.
Sweden's Minister of EU Affairs and Trade Ann Linde and Iran’s ICT Minister Mahmoud Vaezi met on Saturday, and according the Iranian minister, the two sides discussed establishing a line of credit by two Swedish banks in cooperation with Iranian companies in IT and telecommunications sector, ISNA reported. Vaezi said the two sides also agreed to put more focus on R&D, and developing bilateral cooperation in various areas including in technology transfer. Vaezi confirmed that he and the Swedish minister signed an agreement on cooperation in the IT and telecommunications sector that could “open a new chapter in the two countries’
cooperation.”
IRNA wrote on Saturday that Head of Sweden Trade Council Ms. Ilva Berry and ICCIM President Gholam-Hossein Shafeie met on Saturday after launching the Sweden Trade council office in Tehran. The council has already established representative offices in 50 countries. Ilva Berry has said that in the past few days, a number of Swedish banks have held negotiations with the Central Bank of Iran in order “to find solutions for financing joint projects.” Shafeie said
“we are waiting for the outcome of the two governments’ negotiations for eliminating banking
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and insurance problems in order to be able to increase bilateral trade volume.” Shafeie cited Iran’s geographic position in the region as a good opportunity for developing relations and said
“Iran is the most cheap and close route for access to the central Asia and Caucasus regions and a quick access to the regional 400-million-strong market.”
On the sidelines of a joint industrial-economic session held on Saturday between Iranian and Swedish companies, IDRO Managing Director Mansour Moazzami declared that an agreement has been signed with a Swedish company to participate in a tender to lay 600 km of oil pipeline, without giving more details. In the car manufacturing sector, Moazzami said negotiations are being held for manufacturing low-cost passenger automobiles. Moazzami however underscored that Swedish companies should not view Iran as a market for exporting their products and rather, they should think about cooperation with Iranians. According to ISNA, Moazzami said that in the past year, 19 MoU s have been signed of which seven have entered into the contracts and by 20 March, two more agreements will enter into the contracts.
Of note, in an exclusive interview with Tasnim news agency on November 6th, 2016, Swedish Ambassador to Tehran Ms. Helena Sångeland said that “Swedish companies are well-known for their long-lasting presence in the export markets, and this is something Iran needs at this stage.” Ms. Sångeland said the value of her country’s exports to Iran from the start of 2016 till now has reached 125 million euros, and added that she wants bilateral trade volume goes back to the pre-sanctions level and beyond. “The Swedish Trade & Invest Council has predicted that the country’s exports to Iran in the next 5-10 years will significantly grow. This certainly depends on [the progress] in banking and financial relations. The Swedish business society believes that Iran should be one of our very important trade partners in the next years.”
Iran’s Economy minister visited Hungary
Iran’s minister of Economic Affairs & Finance Ali Tayyebnia has travelled to Hungary and six agreements have been signed between the two countries, ISNA reported on Saturday. After 23 years of hiatus, wrote ISNA, the Iran-Hungary joint economic cooperation commission was held on February 7 in Budapest after which Tayebnia and Hungarian Minister of Foreign Affairs &
Trade Péter Szijjártó attended a press conference. Szijjártó said the Hungarian Eximbank has allocated an 85-million-euro line of credit to Iran which can be used for joint economic projects.
He however confirmed the existence of some problems for joint economic cooperation.
Tayyebnia said during the press conference that Iran will use Hungary as a base for increasing its economic cooperation with Europe. A number of MoUs were signed between the two ministers in tourism, sports, transportation and urban services, cultural heritage, and joint economic cooperation.
