Ukraine Vying for Energy, Transportation Opportunities

EghtesadOnline: With only days left to Iran’s presidential elections, the Ukrainian Embassy in Tehran held a gathering of Iranian and Ukrainian officials and businesses this week to discuss bilateral cooperation in heavy industries.

News ID: ۷۷۶۳۲۵

20 May 2017

The star of the show and co-organizer of the event was the Ukrainian company Interpipe, a manufacturer of seamless steel pipes used in oil and gas sectors, rail parts and wagons.

The European country’s presence in Iran at such a politically critical time could signal their optimism regarding Iranian market prospects.

“Iran is expected to have one of the highest rates of economic growth in the world in the next 10 years and it already has one of the most diverse economies in the region. Then, it is no wonder why international firms everywhere are eying the Iranian market,” Denis Morozov, chief financial officer at Interpipe, told the gathering at the Monday event.

Interpipe is no stranger to Iran, as it has worked with several partners in the country throughout the years, mostly in supplying rail parts and wheels. It already has a 3,000-wheel shipment underway for RAJA Rail Transportation Company.

Tuka Rail Company, Steel Pishtaz Gilan Co. and Rahahan Kesheh Co. are among its other partners dealing in wheel supply, steel marketing and locomotive supply respectively.

The company now intends to further expand its market share in Iran’s transportation and energy sector.

Interpipe’s products are marketed in more than 80 countries through a network of sales offices located in the key markets of CIS, the Middle East, North America and Europe.

In 2016, the company supplied 572,000 tons of pipe and wheel products. The company employs over 11,500 people.

“We have a positive and optimistic view [of the Iranian market] … We consider it as strategic and regard it with high interest, and are currently working on setting up a roadmap for expanding our bilateral ties. In fact, our attitude is very close to other EU countries seeking close business ties with Iran like Germany and France,” Ukrainian Ambassador Serhii Burdyliak told Financial Tribune on the sidelines of the event.

According to the ambassador, Iran-Ukraine trade stood at about $1.5 billion in 2016, up 35% compared with the previous year. Ukraine’s agricultural exports to Iran made up close to $800 million of the figure.

Path Forward

Burdyliak pointed to a “strategic formula” agreed by the two countries for expanding economic ties in future.

“Ukraine will guarantee [agricultural and other] product supply of Iran, and Iran would guarantee Ukraine’s energy supply and security,” he said.

The envoy said it was basically impossible to think of such cooperation during the sanctions period, but things have changed now.

“Those who seek to do business with Iran, the lifting of sanctions regime imposed on the country over its nuclear program was a breath of fresh air,” he said.

The fifth session of Iran-Ukraine Economic Commission was held in Tehran last year after a 12-year hiatus due to sanctions. The sixth edition will be held in Ukraine this year.

“I believe your country has a unique opportunity of entering the Ukrainian energy market, both for supply of gas and oil refinery products and also for taking part in the modernization of our oil refinery plants,” he said.

Burdyliak said other than access to a sizable market, Iran will be able to profit from Ukraine’s two pipelines connecting Asia to the European Union, adding that there is a lot of demand from EU countries for Iranian oil.

Aviation, agriculture and information technology are other avenues of cooperation between the two countries with a high potential for expansion.

Banking, Visa Issuance Troubles

There are still limitations to expansion of economic ties. First, there are banking issues impeding the establishment of direct relations and money transfer, and the visa regime.

“Representatives of National Bank of Ukraine met with officials from Central Bank of Iran back in November and are now ready to hold the second meeting to discuss all the peculiarities and technical issues. We are very close to solving the banking problem altogether,” he said.

Following last year’s meeting, both sides agreed to establish direct correspondent relations in Ukrainian and Iranian banks.

The ambassador added that Ukrainian bankers are currently seeking some forms of money transfer with Iran such as currency swap.

The ambassador noted that visa issuance has been facilitated from the Ukrainian side and “the ball is now in the Iranian court”.

According to Burdyliak, the embassy only requires higher speed Internet to increase the number of visas issued.