Volkswagen announced on July 4 that after a 17-year market absence it will soon once more be selling its vehicles in Iran, working with Iran's Mammut Khodro to import VW brand models Tiguan and Passat via eight dealerships.

Analysts who follow the Iranian auto industry have known for several months that the brand would at some point open new showrooms across the Islamic Republic. However, both Volkswagen and Mammut Khodro have remained tight-lipped until now.

The announcement comes as another welcome boost to Iran, which on July 3 was able to celebrate French energy major Total's decision to risk the prospect of Washington possibly tightening sanctions against its economy by going ahead with a $1bn commitment to develop part of the giant South Pars offshore gas field. The move represents the first deal between a large European energy player and Tehran in more than a decade.

"By returning to Iran, the Volkswagen brand is filling in another blank spot on the global automotive map. We are thus strengthening our international presence still further. At the same time, we are taking our very latest models with premium features to our Iranian customers", Anders Sundt Jensen, project manager for the Iranian market at Volkswagen, said.

Volkswagen said that from August it would import two vehicles into Iran to begin with, namely the Tiguan crossover and Passat saloon.

Iranian media, meanwhile, reported that VW was looking to create an assembly line at a Mammut Khodro facility in Karaj, west of Tehran.

However, the fact that Volkswagen is to import just two vehicle types shows it remains cautious about the Iranian market. Nevertheless, analysts say that Iran, a country with a population of 80mn people, should help the German giant trim reliance on volatile overseas markets such as China and Brazil.

Peugeot, Citroen and Renault cars are already sold in Iran. Looking at the Volkswagen move into Iran, Arndt Ellinghorst, a London-based analyst with Evercore ISI, told Bloomberg: “Whether they sell a couple of thousand cars in Iran is more of a signal whether they can get it done in emerging markets. Iran is more important for a Peugeot than a Volkswagen, because the French were bigger in Iran before the sanctions started.”

Privately-owned Mammut Khodro – already the exclusive Iranian importer for the Volkswagen Group's Scania brand – will import VW vehicles and initially distribute them through eight dealerships with a focus on the Tehran region.