Sanctions hit $5.6bn worth of Korean refinery projects in Iran

Korean contractor Daelim has cancelled a $2bn contract to modernise a refinery in the Iranian city of Esfahan, and a similar fate may befall a $3.6bn deal with Hyundai.

The announcement, made in a regulatory filing on Friday, was a response to the US’ decision to abrogate the Joint Comprehensive Plan of Action (JCPOA) nuclear deal and reimpose economic sanctions on Iran.

The contract for the refinery upgrade was negotiated after the JCPOA came into force in 2015 and signed in March 2017. It envisaged a four-year programme to expand and improve the refinery, which was to have been designed, built and financed by Daelim. However, given the extra risk created by the sanctions, the company was unable to secure the necessary funds.

Sanctions are also expected to hit a $3.6bn deal between Iran, Hyundai and Japan’s Chiyoda Corporation to construct the Siraf Refining Park in the southeastern coastal province of Bushehr.

Hyundai has said it is currently in discussion with the Iranians about whether to go ahead with the deal.

The project was to have involved the building of eight refineries, increasing the capacity of Iran’s refining industry by 22% and expanding its petrochemical feedstock production by 57%.

The project took 18 months to negotiate (see further reading).

Some $2bn of this deal was to be financed by the Korean government and $1bn by the Japanese state.

Image: The March 2017 signing ceremony for the Esfahan project (Daelim)

Further reading

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