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Iran Sanctions Lifted: PSA Peugeot Citroen Will Pay $446 Million in Compensation to Get Back to Iran's Markets

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February 8
5:04 AM 2016

French car manufacturer PSA Peugeot Citroen signed a new contract with Tehran, stating that the car company would pay $446 million in compensation to Iran's largest carmaker, Iran-Khodro Company. The compensation is meant to cover losses after Peugeot pulled away from Iran due to nuclear sanctions imposed by the UN, U.S, and EU, also to reinstate the two companies' partnership in the country.

In January, Peugeot and Peugeot and Iran-Khodro Company signed a joint venture agreement that stated that the two companies would produce latest-generation vehicles in Iran. The new contract also stated Peugeot's compensation to Iran. But the exact content of the contract remains confidential, as reported by Tehran Times.

According to Channel News Asia, the most of the compensation would be in the form of services and discounts. The services and discounts would include auto parts for current models being produced in Iran and devices for Peugeot 207 models. Peugeot had written off Iran-Khodro's debt of 11 million euros, and 65 million euros in royalties owed between 2012 and 2016, as stated by Yekke-Zare, managing director with the Iran-Khodro Company. The remaining 317 million would be paid in future co-operation in services and training.

Peugeot is the biggest-selling European carmaker in Iran before the nuclear sanctions were posted. The company stopped operating in Iran in 2012 following the international sanction over the country was extended to the automobile sector. 

The nuclear sanction on Iran had been lifted in January after it's certified that Tehran has met all its obligations under the nuclear deal. Following the lifting of the sanctions, many foreign companies and businesses have been making efforts to revive partnership with the country and to go back doing business in Iran.

As for Peugeot itself, coming back to the Iranian markets is particularly important. When the company suspended sales in Iran in 2012, it lost nearly 10 percent of global deliveries, according to Reuters. Currently, four million Peugeot cars are on the roads in Iran. The suspend also got in the way of the relationship between the French company and Iran which had been established more than 50 years ago.

Peugeot declined to comment on further details of the new contract, but the company considered the deal as a good and balanced deal. Peugeot was one of the first foreign company to reestablish partnership and relationship with Iran after the nuclear sanctions were lifted. The reinstatement cost the company as much as $446 million, but getting back to the Iran markets was critical for the company. 

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