South Korea to Provide an €8 Billion Loan to Iran

Iranian media reported that the contract for the 'largest post-JCPOA foreign loan' worth approximately €8 billion was signed on Thursday, August 24, between the executive director of South Korea's Export-Import Bank and the head of Iran's Organization for Investment and Technical and Economic Assistance. According to ISNA news agency, Mohammad Khazaei, head of the Organization for Investment and Technical and Economic Assistance of Iran, announced that 12 Iranian banks will be the contracting banks for utilizing this loan, and both public and private sectors in Iran can benefit from it. Additionally, according to the Iranian Investment Organization, projects in the fields of health, transportation, and energy are ready to be introduced to the South Korean side, and after the loan agreement is signed by the Iranian banking sector and the government's approval to guarantee these loans, Iran's Ministry of Economy will take action to issue the loan guarantees. Iran and the Export-Import Bank of South Korea had previously signed a contract in 2014 for cooperation in health and hospital construction, and after negotiations between the two countries and the possibility of utilizing these facilities for other sectors including roads and power plants, this amount increased from €5 billion to over €8 billion. Valiollah Seif, the head of Iran's Central Bank, also stated in a note without providing details that this contract 'will lead to the operationalization of numerous construction and production projects in the country.' He considered this contract a result of the Vienna nuclear agreement and the lifting of Western sanctions against Iran, stating that due to sanctions, 'not only was the provision of new credit lines for financing construction and production projects halted, but the repayment of some previously received loans also faced problems and obstacles due to the loss of payment channels.' After the Vienna nuclear agreement, South Korea's SK Group also signed a preliminary contract worth $1.8 billion with the National Iranian Oil Engineering and Construction Company aimed at optimizing the Tabriz refinery. Previously, a $1.7 billion loan agreement was signed with China's Export-Import Bank for electrifying the Tehran-Mashhad railway. Officials in Hassan Rouhani's government have expressed hope for attracting foreign investment following the Vienna nuclear agreement. However, according to a report by Bloomberg News, although investment in Iran has been lower than expected since the nuclear deal in 2015, billions of dollars in contracts signed with Tehran serve as a barrier against the future cancellation of the nuclear agreement. Meanwhile, according to a report by UNCTAD published about two and a half months ago, foreign investment inflow into Iran remains at a very low level. Based on assessments by UNCTAD experts, the volume of foreign direct investment in Iran in 2016 increased to $3.337 billion compared to the previous year, but it still remains significantly lower than the peak during the economic sanctions in 2011 and 2012. According to this data, the total volume of investments in Iran over the past years has been $48 billion, while this figure stands at $231 billion in Saudi Arabia and $133 billion in Turkey. Fereydoun Khavand, an economic analyst in Paris, noted on June 12 in a piece on Radio Farda's website that the low level of incoming investment to Iran indicates that despite its considerable potential, the JCPOA has not been able to end 'Iranophobia' among foreign investors. According to Mr. Khavand, in the field of foreign investments, the risk tolerance of countries is determined based on a series of legal, economic, and political factors, and Iran has not been able to present a new image to foreign investors in these areas as it should. Since Donald Trump's presidency, the U.S. has confirmed Iran's compliance with the JCPOA twice, although it has simultaneously imposed new sanctions against the Islamic Republic due to some 'destabilizing behaviors' of Iran that the U.S. considers contrary to the spirit of the nuclear agreement. The U.S. government has previously emphasized that Iran's missile program and the activities of the Quds Force of the Islamic Revolutionary Guard Corps violate the spirit of the nuclear agreement, as under this agreement, Iran is supposed to participate in creating peace and stability in the region and globally. In this context, Donald Trump has repeatedly stated that, in his view, Iran is not adhering to the 'spirit of the nuclear agreement.' Previously, the U.S. Senate passed a bill known as the 'Countering Iran's Destabilizing Activities Act' with a significant majority on June 15, which referred to Iran's ballistic missile program as a threat. The Iranian parliament also approved a bill known as the 'Countering U.S. Adventurism and Terrorism' in retaliation for U.S. sanctions against the Islamic Republic on August 13. Despite criticisms from Islamic Republic officials regarding what they call the U.S.'s 'breach of trust' in implementing the Vienna nuclear agreement, Iran has signed contracts with foreign companies after the Vienna nuclear agreement. Contracts with Total and CNPC worth $5 billion for the development of Phase 11 of South Pars, a contract with Turkey's Unit International worth $4.2 billion for the construction of seven gas power plants, and a contract with Turkey's Sinopec worth $1.2 billion for the development of Phase 1 of the Abadan refinery are among Iran's oil contracts with foreign companies after the Vienna nuclear agreement. Renault's contract worth €660 million for joint investment and increasing car production in Iran, as well as contracts with Peugeot-Citroën worth €700 million, are among the contracts of foreign companies with Iranian companies for car production. Boeing's contracts with Iranian airlines worth €20 billion and a contract with ATR worth $536 million are among other contracts for Iran's aircraft purchases. Iran has also signed a $3 billion contract with Transmashholding and a €1.5 billion contract with Siemens for wagon construction and rail system optimization.