Analysts said the move would be a further blow to foreign investment in Iran, seen as crucial for creating jobs for the country’s young population. It also comes at a time of increasing international tension over Iran’s nuclear programme.
A dispute over exports of the no frills car appears to be at the heart of the dispute.
“Iran’s industry and mines minister has ordered the suspension of the L90 project until Renault company considers this ministry’s views regarding the project,” said Mohammad Karimi, a spokesman for the ministry.
An official for the L90 project in Iran said that Renault had accepted that 60 percent of the car should be built inside Iran, the car’s platform could be used to build other models and that the L90 would not enjoy a monopoly in its class of car in Iran.
But he said: “the main problem remains where Iran wants to have a share of this company’s (Logan) exports”.
Renault said it was working with Iran to find a solution to the dispute.
“The (Iranian) government wants to put the emphasis on exports, we are studying together all possible solutions,” Renault spokesman Stephane Farhi told Reuters.
He said there was no timetable for the discussions.
Renault has said it had set up a joint venture with an Iranian partner to produce the L90 in Iran from 2006.
The L90 is better known as the “Logan”, a car that Renault already produces in Romania and which forms a key part of its strategy to boost sales in emerging markets.
Saeed Leylaz, an analyst who has close links to people involved in the project, said the decision would send a bad signal to international investors.
“It is a very bad sign to the world community. It shows they can’t trust us again,” Leylaz said, adding that it will also have a major impact on the local car parts industry.
He said that the joint venture company had signed contracts worth about $800 million with local firms to supply parts. These contracts were now being threatened, he added.
Leylaz pointed to a previous dispute in which Iran threw out a Turkish operator of a project to run a new Iranian airport, saying it had already damaged Iran’s international commercial reputation.
“In this case, we are losing our internal reputation because hundreds of suppliers are involved in this project,” he said.
(Additional reporting by Edmund Blair in Tehran and Nick Antonovics in Paris)
