German carmaker Mercedes-Benz has paid Iran Khodro 42 million euros in compensation for leaving Iran in the heyday of Western sanctions on the Islamic Republic, Tehran-based media reports say.
The reparation comes as Mercedes, owned by Daimler, seeks to return to Iran in anticipation of sanctions being lifted after last month’s conclusion of nuclear talks between Tehran and the West.
Mercedes-Benz, as one of Iran Khodro’s oldest trade partners, suspended all activities in Iran in fear of US reprisals for doing business with the Islamic Republic.
The decision led to losses in Iran Khodro’s production of commercial and semi-heavy vehicles, the daily Khorasan said in a report also published by several other newspapers.
“Now that Mercedes-Benz intends to resume activities in Iran, Iran Khodro executives have demanded 42 million euros from the company in compensation,” it added.
The German company has a long-standing portfolio of producing luxury cars, vans and buses in Iran. There is a vast infrastructure for production of diesel engines by Mercedes in Tabriz where the Iranian Diesel Engine Manufacturing (IDEM) company is based.
Mercedes-Benz gave up a 30% stake in IDEM and discarded plans to export three-axle trucks to Iran in 2010 before the US and Europeans intensified sanctions on the country.
The German company is among several other European automakers eyeing Iran’s car market, being billed as the Middle East’s largest.
Last month, Iran Khodro Managing Director Hashem Yekke-Zare said his company and Mercedes “will sign a deal soon” for production of luxury cars and commercial vehicles.
Mercedes-Benz, he said, had announced its readiness to buy 30% of shares in IDEM and begin production of the latest diesel engines.
Iran Khodro has also held negotiations with other German automaker, Volkswagen, on production of cars and investment in Iran, as well as transfer of technology and exports of products, he added.
The announcement came after German Economy Minister Sigmar Gabriel visited Iran at the head of a 60-member delegation including executives of Siemens, Linde, VW, Daimler and GIZ.
Leading French carmakers, Peugeot and Renault, are also primed for resuming business in Iran.
According to the Khorasan daily, Iran Khodro was seeking compensation from Peugeot as well for pulling out of business with Iran’s biggest carmaker in 2012.
Iran Khodro accounted for about 13% of the French company’s annual sales when it withdrew, idling a large assembly line in the country, according to Iranian officials.
“Peugeot must know that it has to account for its past behavior,” Yekke-Zare said last month.