Seoul, Tehran expand decades-long friendship to economic partnership

By Kang Yoon-seung, Koh Dong-wook and Seo Mi-sook SEOUL, May 10 (Yonhap) -- Bilateral economic relationship between South Korea and Iran is expected to take another big leap forward following President Park Geun-hye's historic trip to Tehran in early May, industry watchers and corporate officials said Tuesday. Through a string of meetings between Park and her Iranian counterpart Hassan Rouhani and other Iranian leaders, the two countries agreed to widen cooperation in trade, investment, construction, financial services and other economic areas, with Iran's supreme leader Ayatollah Ali Khamenei reportedly telling the visiting South Korean president that Iran wants to learn from South Korea about science and technology. While industry watchers paint yet another rosy outlook over the Seoul-Tehran ties, the history of friendship dates back to 1962, when the two established their diplomatic relationship. Seoul kicked off its diplomatic mission in Tehran in 1967, while Iran also opened its embassy in Seoul eight years later. South Korea, then a young country struggling to rebuild itself from ruins of the 1950-53 Korean War that ended with only a ceasefire armistice, sent tens of thousands of workers to Iran through 1979 to earn foreign currency for South Korea's economic development. Such a partnership paved the way for South Korea to emerge as Asia's fourth-largest economy today, industry watchers said. During the 1973 global oil crisis, Iran was also the only supplier of oil to South Korea, which helped the country's growth engine keep running. Likewise, for a long time, Seoul and Tehran were more than just business partners. Their friendship has eventually reached out to other areas, expanding cultural exchanges as well. As the symbol of the brotherhood, South Korea's flourishing capital city named one of its streets at the posh Gangnam district located in southern Seoul as "Tehranno," literally meaning "Tehran Street." The street full of skyscrapers is now considered to be the hub of South Korea's information and communications technology (ICT) industry, one of the key pillars of the country's economy. In response, Tehran also opened a street named after Seoul. Tehran opened Seoul Park in 2003 on the rising popularity of Korean pop culture in the Middle Eastern country, a trend which is often referred to as "hallyu." But the South Korean-Iranian relationship was not always only peaceful, although the two always maintained a close economic tie. While South Korea and Iran stood as firm brothers in the 1960s and 70s, the two countries had faced a crisis in the 1980s, when Iran provided North Korea with US$2.6 billion worth of weaponry. The 1980-1988 Iran–Iraq War also emerged as a major drag on the relationship of the two. After the war, the two countries normalized their ties, with South Korean companies tapping the Middle East country to help Iran rebuild itself from the fatigue of the war. But another crisis came in 2006, when the international community started its efforts to impose economic sanctions against Iran amid the concern that the country is developing nuclear weapons. The United Nations imposed sanctions for its nuclear weapons program in 2010. South Korea also joined the move, especially as Seoul has been facing similar threats from Pyongyang. Earlier this year, the U.N. nuclear agency said that Iran has met all of its commitments under last summer's landmark nuclear deal to crimp Tehran's ability to make atomic weapons, lifting the years-long economic sanction. Despite the political issues, the economic engine of the two countries remained rather intact, and South Korean workers still stayed in Iran, lending support to the economic development of both Seoul and Tehran. POSCO Daewoo Corp., formerly Daewoo International Corp., has been in Iran amid the changing international atmosphere since 1975. South Korean builder Daelim Industrial Corp. also stands as a symbol of the strong economic tie of two countries. Since 1975, Daelim has clinched $4.5 billion worth of projects over the past 40 years. Daelim also started a project to build a gas refinery in Kangan, 2,200 kilometers from Tehran in 1984, which lasted for six years and four months. Despite the geographical difficulties coupled with the Iran-Iraq War, Daelim struggled to complete the project on schedule, vowing to keep its commitment with the business partners. A crisis came in July 1988, when a terrorist attack killed 13 South Korean employees and injured 40 workers. The public was then angered at Daelim for failing to protect its workers. The company, however, decided to keep the project going, and resumed construction three months later. The project not only helped bolster the reputation of Daelim in Iran, but also that of South Korean firms as well. Accordingly, industry watchers said the biggest asset of the Seoul-Tehran relationship is the never-changing credibility that persevered through geopolitical situations. On the back of the efforts, South Korea and Iran now stand as key economic partners. South Korea's exports to Iran came to $3.7 billion, while imports from the Middle East country came to $2.3 billion. Park's latest visit to Iran also heralded the start of the full-fledged business cooperation between the two countries. About 230 South Korean business leaders and Cabinet ministers, who accompanied Park on her Tehran visit, produced a large number of deals, which included cooperation in railway and dam construction, gas field development, maritime transport, customs affairs and the establishment of a euro-based settlement system aimed at making it more convenient to carry out trading. Moreover, Korean Air Lines will launch a direct flight between Seoul and Tehran later this year, while leading South Korean business associations, such as the Korea Chamber of Commerce and Industry, and commercial banks will open offices in the Iranian capital. All told, 59 preliminary deals were signed for economic cooperation during Park's Iranian visit, according to her office. "(Iran) could become a huge breakthrough for their exports," Oh Jung-kun, a professor at Konkuk University in Seoul, said. "At a time when our exports to China are projected to shrink a lot, it is expected to fill up the void to a significant extent." South Korea once enjoyed active trading with Iran, but it has dropped significantly after trade with the Middle East country was restricted following international sanctions. Industry data showed that the trade volume between South Korea and Iran stood at $6.1 billion in 2015, compared with $17.4 billion in 2011. Iranian President Rouhani noted that he wants to boost bilateral trade to $18 billion in the coming years. The rosy outlook might be based on signs of its fast economic growth. A World Bank report earlier forecast that its economy will grow 5.1 percent and 5.5 percent this and next year, respectively, possibly turning around the negative growth seen in the previous two years. "All the things that we have achieved (through the president's visit to Iran) will likely serve as a chance for us to preempt the Iranian market seen as an integral part of the second-round of the Middle East boom," said An Chong-bum, senior presidential secretary for economic affairs. "A foothold has been secured to help us return to the pre-sanction trade level." Policy watchers said Park's visit can help create a new momentum for a "second Middle East boom," referring to potential business opportunities in Iran. The first Middle East boom refers to the rush of South Korean firms and workers to the region in 1970s. As Iran boasts the world's fourth-largest known crude oil deposits and ranks No. 1 in terms of natural gas reserves, it is vital for South Korean firms to tap deeper into the Iranian market to expand their presence in the Middle East. Daelim Industrial said it plans to ink $8.1 billion worth of deals in Iran soon, including the construction of dams and railroads. Daewoo Engineering & Construction Co., a major South Korean builder, said it has won a tentative deal to join a large-scale infrastructure construction project in Iran, adding it signed a memorandum of understanding with Bahman Geno Co., a local energy company, promising to cooperate in building a refinery plant for about US$10 billion. "The presidential visit paved the way for South Korea to clinch a combined deal worth 50 trillion won," an official from International Contractors Association of Korea said. "The outcome was made possible by South Korean builders' credibility that fought war, heat, and geographical challenges." "The government must roll out state-level support to have such efforts bear fruit," he added. colin@yna.co.kr (END)