Iran group issues threat over Daewoo deposit

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Iran group issues threat over Daewoo deposit

Trade with Iran may suffer unless creditors of Daewoo Electronics consent to reimburse Entekhab Industrial Group for its deposit on the failed purchase of the Korean company, the group’s labor union leader threatened last week.

“Exports of Korea’s home appliances to Iran or Korea’s oil imports from Iran could be stopped” unless the down payment is returned, Ghaznavi Mahdi, the labor union’s leader, told the Korea JoongAng Daily, describing this as a “worst-case scenario.”

“This is because our company is very well-placed in the eyes of the Iranian government, and we can ask the government [to pursue certain measures] that could affect its relationship with the Korean government,” he added.

The Iranian group put down $57.8 million to guarantee its purchase in 2010 after it was chosen as the preferred bidder for Daewoo Electronics.

However, after Korea agreed to follow U.S. sanctions against Iran, the group was not able to retain investors’ interest in the deal. Moreover, Seoul was not able to accept a guarantee from a local unit of Iran’s national bank, the vehicle through which the group had proposed paying for the acquisition.

The creditors of Daewoo Electronics - Woori Bank and Korea Asset Management Corporation - canceled the deal after the Iranian electronics maker did not meet the deadline for the entire payment in May last year.

More than 1,000 former and current employees of the Iranian outfit held a protest in front of the Korean embassy in Tehran last month to ask the creditors and the Korean government to accelerate moves to repay the down payment. “[This] doesn’t concern sanctions against Iran,” said Mahdi. “We paid to get [Daewoo Electronics], but we didn’t get it.”

Mahdi says the labor union has vowed to continue holding protests in the future. He said 1,500 of the group’s 4,000 workers have lost their jobs due to belt-tightening necessitated by the deposit.

High-ranking officials from various ministries met early this month and urged the creditors to seek an amicable resolution to the conflict.

“The government is concerned the issue may develop and have a negative impact on bilateral economic cooperation,” said a senior-ranking official at the Ministry of Knowledge Economy. “I understand creditors are worried that making an exception here would undermine the very reason why companies sign contracts and make down payments, but [the national interest is more important].”

Entekhab Industrial Group is also refusing to pay Daewoo Electronics the $30 million it owes the company for parts already supplied.

Meanwhile, Hanwha Group is engaged in litigation with the creditors of Daewoo Shipbuilding and Marine Engineering to retrieve the deposit it paid for the company in 2008.

By Lee Sun-min [summerlee@joongang.co.kr]
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