August 12, 2010 11:30
U.S. sanctions against Iran are expected to deal a heavy blow to Korean exports to the country. Iran is among the biggest markets in the Middle East for Korean cars, and Korean home appliances account for more than 50 percent of the market there. If the sanctions continue, Korean businesses are expected to suffer considerable losses.
Carmakers are already feeling the pinch. In the first half of this year, they exported US$361 million worth of vehicles and $226 millions of auto parts to Iran. But Hyundai and Kia have been unable to export cars to Iran since July 20. From January to June, they exported 41,967 vehicles to Iran, including semi-finished models. An Iranian manufacturer produces its own version of a Kia Motors model under license and rolled out 560,000 of them last year. That model is the most-produced car in Iran. Industry sources say Korean carmakers are expected to suffer up to $500 million in export losses in the second half of the year.
Leading home appliance makers Samsung and LG have not been affected so far, but strengthened sanctions could lead to export declines.
"There has been a surge in interest in Korean culture and TV dramas in Iran and that has increased the popularity of Korean-made refrigerators, washing machines, air conditioners and mobile phones," said one industry source. Exports of washing machines to Iran rose 60 percent last year, of air conditioners 25 percent and of refrigerators 15 percent. "Iran ranks among the top five markets in the Middle East for Korean exporters," said an LG Electronics staffer. "It's a lucrative market that has been growing between 10 to 20 percent each year."
Korean builders, who are involved in six construction projects in Iran worth $1.57 billion, have ordered their legal, financial and plant design staff to come up with steps to deal with the situation. "The big problem is that we probably won't be able to win any more orders from Iran," a construction industry insider said.
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