French car maker Renault SA is set to open a new factory in Iran, producing 150,000 extra vehicles a year, in the latest sign of deepening Western business ties with Tehran following the lifting of sanctions.
Renault said Monday it would open the factory in a joint venture with state-owned Iranian conglomerate Industrial Development & Renovation Organization, or IDRO, and Parto Negin Naseh, which imports Renault vehicles to Iran. The deal comes on top of Renault's existing joint venture in Iran and is part of a wave of deals by Western corporations following the 2015 nuclear accord.
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Monday's deal is worth about EUR660 million ($777 million) in its first phase, Mansour Moazami, the head of IDRO, said, according to the official Islamic Republic News Agency. Renault declined to comment on the deal's value.
Renault will be the majority shareholder in the venture after an initial period of joint control. It announced in September plans to form the new venture, but only disclosed the partners Monday.
Under the deal, cars will start entering the market late in the next Iranian year (the Iranian calendar runs differently to the Western one), which ends in early 2019, Mr. Moazami said.
The venture will see an engine plant with a capacity of 150,000 units a year built. The facilities will be in Saveh, 70 miles south of Tehran.
Renault has 60% of the shares of the venture, with the remaining 20% with IDRO and 20% with Parto Negin Naseh, according to the Islamic Republic News Agency. The deal would create 3,000 jobs, it added, and Renault would provide distribution, sales and after-sales services.
Renault already had capacity to build 200,000 vehicles a year in Iran before the new production deal, but its expansion had been slowed by sanctions before the nuclear accord.
European energy and infrastructure giants, including Germany's Siemens AG and France's Total SA, have reached major deals in Iran since the lifting of sanctions, defying a push by the U.S. Trump administration to penalize it over its ballistic missile program.
In Jan. 2016, Western powers and the United Nations lifted penalties intended to block Iran from developing a nuclear weapon, after confirming the country was sticking to the initial terms of the 2015 accord.
Last month, Total said it would sign a deal to complete a $1 billion investment in an Iranian gas field as part of a partnership with China National Petroleum Corp. and an Iranian company.
Shortly after sanctions were lifted, French auto maker Peugeot launched a EUR400 million joint venture with Iran Khodro, Iran's biggest car maker, which aimed to make 200,000 cars a year. Citroën also signed a more-than EUR300 million deal with Iran's SAIPA in October.
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(END) Dow Jones Newswires
August 07, 2017 08:59 ET (12:59 GMT)