On the surface, South Korean steelmaker Posco Engineering & Construction (Posco E&C) acquiring an 8 per cent stake in an Iranian mill is not a particularly intriguing story.

What is interesting, however, is who owns 38 per cent of Posco E&C, which is expected to work extensively on the project. 

The Public Investment Fund (PIF) of Saudi Arabia acquired a stake in Posco E&C last year for $1.1bn. The acquisition makes the fund the firm’s second-largest shareholder, in addition to gaining two seats on the board of one of South Korea’s biggest contractors. 

These two seats were filled by Saudi Aramco’s executive director Ahmed al-Subaey, and Acwa Power’s chairman Mohammad Abunayyan.

MEED reported at the time that the new board was likely to step up plans to establish a joint venture focused on a series of infrastructure projects, including a railway, a hotel and other construction schemes undertaken by Riyadh.

As Posco announced the acquisition of a stake in an Iranian steel scheme, details emerged that Posco E&C plans to build a power plant as part of the steel project. It was also stated that the construction unit expects to build desalination facilities.

The decision to embark on projects in the Islamic Republic comes as relations between Riyadh and Tehran are deteriorating.

Historic rivals in the region, diplomatic relations between Sunni Saudi Arabia and Shia Iran were severed in January 2016 with the execution of prominent Shia cleric Sheikh Nimr al-Nimr.

Protesters against the execution took to the streets of Tehran on 2 January. On the same day, sections of the crowd ransacked the Saudi embassy in the capital and later set it on fire. All diplomatic ties with Iran were cut by the kingdom, with allies Bahrain, the UAE and Sudan following its lead in the days after the incident.

This severing of ties was paired with a cancellation of all Saudi trade and flights to Iran, which, nearly two months on, have yet to be reinstated.

On a broader, geopolitical level, both countries stand on opposing sides in two regional conflicts.

In Syria, Iran wants President Bashar al-Assad to remain in power, while Saudi Arabia wants him removed, with both countries providing support for rival military groups on the ground.

In Yemen, a Saudi-led coalition is fighting Shia Houthi rebels, which the kingdom has accused Iran of supporting. The rebels there look to Iran as a spiritual leader. Moreover, Riyadh has accused Tehran of sending fighters to Arab countries and plotting attacks inside the kingdom and against its Gulf allies, while Iran has accused Saudi Arabia of supporting the jihadist group Islamic State in Iraq and Syria (Isis).

More recently, the regional powers have come to blows over energy policy.

Both nations have vast oil reserves, but with a small population and large amounts of accrued wealth, Saudi Arabia is keen to play the long game and keep oil prices moderate in the short term. Iran, on the other hand, is emerging from decades of crippling sanctions and is keen to keep oil prices high in the short term to improve the country and the quality of life for its nearly 80 million citizens.

Amid all this tension, aggression, and frosty economic and diplomatic relations, a South Korean contractor is quietly transcending the politics of the region by planning projects on both sides of the Gulf.