The Obama administration issued a statement on January 20 that it would temporarily lift sanctions against Iran, as Tehran has taken steps to cooperate with the West in working out a nuclear agreement. Korea’s export-import companies are expected to benefit.
South Korea regained the right to resume the export of automobile parts and steel and import of oil from Iran, which has historically been its major supplier.
However, there are concerns that this measure is limiting, as it is a temporary easing, lasting only six months.
According to the Korea Trade-Investment Promotion Agency on January 21, the automobile parts industry is to be the biggest beneficiary, as sales of exports in 2012 was US$148 million, 28.6 percent of the market. The temporary lift of sanctions will give back the luster that Korean auto parts has lost when an influx of Chinese products began flooding the Iranian market since the sanctions began 7 months ago.
The steel industry is also among the beneficiaries of the ease of sanctions. Sales of steel products were US$373 million. The market share of steel products is also 24.3 percent, nearly a quarter of the whole market. Particularly, the demand for steel plates for automobiles is expected to rise, and overall, Iran’s focus on manufacturing is expected to help increase the general demand for steel as a whole.
The petrochemical industry, which tops the market share in Iran, is also an area to watch. Sales of petrochemical products were US$147 million, with market share of 36.1 percent.
KOTRA expected that petrochemical products would stabilize as well. Ahn Keun-bae of KOTRA said, “The price of crude oil from Iran is about four dollars cheaper, and Korea’s companies will benefit, as products will be made more price attractive.”
Electronics, IT products, and textiles were exempt from sanctions, but are expected to gain further boosts, as their sales had been gaining thanks to the popularity of Hallyu, or the Korean Wave. The textile industry in particular, which owns 53.3 percent of the market, is expected to benefit.
KOTRA forecast that logistics industries such as shipping and air cargo will benefit as well.
However, the temporary six-month relaxation is limiting. Therefore it is arguable as to whether the industries will fully benefit. If sanctions resume in 6 months, there is a high probability that export companies may not receive full payments for the goods and services they delivered.
Thus SK Innovation and Hyundai’s Oil Bank, two of the biggest importers of crude oil, have not yet resumed full-scale import of Iranian oil until the sanctions are completely lifted, since timely delivery is crucial, and any irregularities in a schedule will disrupt their production.
Small and medium-sized businesses that had halted trading with Iran also point out that the temporary relaxation is not sufficient, because of the narrow window of time, as it takes normally 2 to 3 months to deliver the goods and another 2 to 3 months to complete the entire transaction, including the receipt of a final invoice.