Iran's Expanding Economic Relations with Asia Page: 3 of 4
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imports, and accounts for as much as 50% to 100% of Iran's imports of such products as
textiles, rail locomotives, ships, and iron and steel. South Korea accounts for less than 10% of
Iran's imports but remains a key source of certain inputs, such as auto parts. China and South
Korea have become Iran's top auto parts suppliers, accounting for 29% and 22% of Iranian
imports, respectively. Iran has prioritized its auto industry, the largest industry after energy,
after production fell 55% from 2011 to 2013. Iran moved to limit auto imports to incentivize
foreign direct investment (FDI) in domestic production.
FDI in Iran has increased since sanctions were eased. In 2016, total announced investment
projects in Iran were valued at $12.2 billion, compared to $2.5 billion in 2015. East Asian
countries have taken steps to facilitate new investment. In February 2016, Japan and Iran
signed an investment agreement, and in May 2016, South Korea and Iran signed
memorandums of understanding for 30 joint projects in energy and infrastructure. Among new
Asian investments in Iran are:
" Oil. Chinese firms CNPC and Sinopec are in talks for phase two development of
Yadavaran and Azadegan oil fields. Japanese firm Inpex, which divested its 10% stake
in Azadegan in 2010, is reportedly also considering re-joining that project.
" Oil and gas refineries. Hyundai, Daelim, Daewoo and SK E&C signed several
agreements. In July 2017, Korean and Japanese firms signed a $3 billion agreement for
development of Siraf refineries. Sinopec has contracted to renovate the Abadan refinery.
" Natural gas. CNPC joined French company Total in a contract to develop the South
Pars gas field. In May 2016, KOGAS signed an MOU to explore development of Balal
" Shipbuilding. In December 2016, Hyundai Heavy Industries announced a $700 million
deal to build 10 ships for Iran's state-owned shipping company. Daewoo and DSME
announced a joint venture for shipyard construction.
" Autos. In March 2017, Hyundai signed a joint venture production agreement with
Kerman Motor, and Kia Motors resumed selling production kits to Saipa.
China views Iran as an important player in its "Belt and Road" initiative (BRI), which aims to
boost economic connectivity across continents, including through financing massive
infrastructure and energy projects. BRI is also viewed as an outlet to deal with China's
industrial overcapacity in steel, cement, and other commodities. Chinese state-owned
enterprises and private businesses are involved in several projects, backed by state financing,
to modernize Iran's transportation infrastructure, including the Tehran subway. Chinese
automaker, Chery, is the largest foreign automaker in Iran and operates an auto industrial park.
In December 2014, Iran, Kazakhstan, and Turkmenistan inaugurated a railway connecting
China to Tehran, and in February 2016 the first rail cargo arrived in Iran. BRI may facilitate
increased bilateral trade with China, but could also expand Iran's role as a hub linking Central
Asia to Europe.
Iran's expanding economic ties with the countries in East Asia, especially China, are likely to
give Tehran additional allies in its efforts to counter pressure by the Trump Administration
and Congress to renegotiate the JCPOA or to impose additional sanctions on Iran through
legislation. In particular, China, which appears to see Iran as a lynchpin of its regional
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Cimino-Isaacs, Cathleen D. & Katzman, Kenneth. Iran's Expanding Economic Relations with Asia, report, November 29, 2017; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1094521/m1/3/: accessed June 16, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.