Daewoo Strikes Bus Deal With Iranian Company

South Korean bus manufacturer Daewoo Bus Corp. and Iranian automaker Ardebil Sabalan Khodrow-Maywan have teamed up for a $30 million factory to build buses in Iran.

TEHRAN, Iran (AP) -- South Korean bus manufacturer Daewoo Bus Corp. and an Iranian company have teamed up to build buses in Iran, the official Iranian news agency and a Daewoo Bus official said Thursday.

The agreement comes as U.S. lawmakers weigh even deeper economic sanctions on Iran in a bid to pressure the country to halt uranium enrichment and abandon its controversial nuclear program.

Saeed Khademi, the director of Iranian automaker Ardebil Sabalan Khodrow-Maywan, said Wednesday the two firms would build a $30 million factory by next March in Ardebil, about 370 miles (600 kilometers) northwest of the capital, Tehran.

The plant, which is slated to be completed by March 2010, would have a production capacity of 2,000 buses per year and would produce some 800 city and intercity buses in the 18 months after its inauguration, Iran's official news agency IRNA quoted Khademi as saying Thursday.

Based on the agreement, the engines and gearboxes would be manufactured in South Korea. But production would increasingly shift to Iran, where about 60 percent of the parts would be made, IRNA said.

J.G. Yang, a Daewoo Bus official in charge of the firm's Middle East exports, said the company plans initially to supply completed buses built in South Korea but will later send components that will be assembled into complete buses in Iran.

The venture comes as U.S. lawmakers are looking at stiffening existing sanctions on Iran to pressure the country to halt uranium enrichment, which can produce fuel for a nuclear reactor or fissile material for a bomb. The U.S. suspects Iran is using its nuclear program as a covert way to develop weapons — a claim denied by Tehran.

The proposal before U.S. lawmakers would penalize foreign oil firms and shippers that do business with Iran. However, past sanctions have failed to change Iran's behavior, and the hard-line government has been reaching out to international companies with promises of lucrative oil contracts and other business deals.

Iran shrugged off the U.S. move as "psychological warfare."

"Americans know better than anyone that sanctions have no impact on Iran," state television quoted Seifollah Jashnsaz, head of state-owned National Iranian Oil Company, as saying Thursday.

Although the second largest oil producer among OPEC countries, Iran still has to import oil to meet domestic needs because it lacks enough refining capacity.

Yang said he saw no problem for Daewoo Bus in doing business in Iran since most of the components for the buses are supplied by South Korean companies. He said more than 100 Daewoo buses were assembled in Iran under a previous agreement with a company there.

Daewoo Bus has 10 factories in South Korea, China, Taiwan, Costa Rica, Kazakhstan, Vietnam and Pakistan, Yang said. Some are operated independently by Daewoo and others with joint venture partners. The company was once part of the Daewoo Group conglomerate, which collapsed under massive debt following the 1997-98 Asian financial crisis

Iran annually needs some 4,000 buses for its domestic transportation.

Since the 1970s, Iran has been producing a number of different buses, such as German Mercedes and Mann as well as Swedish Scania and Volvo that it has exported throughout the Middle East.

Associated Press Writers Tarek el-Tablawy in Cairo and Kelly Olsen in Seoul, South Korea contributed to this report.

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