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Iran Assigns Large Steel Project To Chinese Company Without Holding Tender

Hot coil production at Esfahan's Mobarakeh Steel Company, the largest steelmaker in MENA. March 2020.

Iran's state-owned Esfahan's Mobarakeh Steel Company has assigned a large steel project to China's Xian Heavy Equipment & Technology without holding a tender, Sharq newspaper reported on Thursday.

The newspaper says the project will cost 200 million euros more than a similar contract with a previous German partner despite the fact that the Chinese company has no prior experience in steel production.

The German company – SMS Group -- had won the contract at a cost of $400 million in a tender in 2017 but abandoned the project due to U.S. sanctions. The company had a long history of working with Esfahan's Mobarakeh since its establishment in 1993.

According to the Financial Times, Xian Heavy Equipment & Technology Co., Ltd was founded in 1994 and its line of business includes the wholesale distribution of industrial machinery and equipment.

Many Western and other firms pulled out of joint projects with Iranian companies when the United States reimposed sanctions in 2018. The biggest case was a decision by the French energy giant total that dumped a large gas project in the Persian Gulf.

Hamidreza Azimian, the CEO of the Iranian steel company has told Sharq newspaper that the company had to assign the project to the Chinese company because "all international companies with the required technology have refused to sign a contract because his company has been sanctioned by the United States".

Azimian claimed that Xian Heavy Equipment & Technology has the required technology and a "positive history of cooperation" with its Iranian partner.

It is not clear how Xian Heavy Equipment & Technology can ignore U.S. sanctions and enter a joint project with the Iranian company. Washington has imposed direct sanctions on many non-Iranian entities that have entered into transactions with banned Iranian firms or rendered services to them.

Esfahan's Mobarakeh Steel Company, the largest steelmaker in the Middle East and North Africa, is located 65 km south-west of Esfahan, the capital of a province of the same name in central Iran. The company produces hot and cold rolled sheets and coils, pickled coils as well galvanized coil and several other steel products for the country's manufacturers of cars, home appliances, heavy metal equipment and construction. The company's output is around 7 million metric tons per year.

Informed sources have told Sharq newspaper that despite being one of the profitable companies in the steel sector, in the past two years the company's debts have increased tenfold.