Hassan Rouhani
Iranian President Hassan Rouhani is on a visit to Europe to secure trade and business dealsGetty

French carmaker Peugeot is expected to manufacture 200,000 cars annually in Iran, starting in 2017, with President Hassan Rouhani set to finalise an agreement. The vehicles are likely to be produced as a joint venture with Iran's largest automaker Khodro.

According to a French government source, cited by the AFP news agency, the deal would be signed Thursday, (28 January), by the visiting Iranian leader. Peugeot was forced to pull out of Iran – its second-largest market after France – in 2012 as pressure of US-led sanctions mounted. The Iranian market accounted for nearly 13% of Peugeot's annual sales when it shut down operations in the Islamic country.

Rouhani is currently on a tour of Europe – the first by an Iranian leader in 17 years – signing a string of trade and business deals. Iran has recently emerged from economic isolation as international sanctions were lifted following the successful implementation of the nuclear agreement.

Just before leaving Iran for the EU visit, Rouhani said: "Important contracts in the car sector are being prepared and are likely to be signed on this trip. Contracts with Peugeot and Renault are likely to be signed."

Peugeot, which is struggling financially and inching towards potential bankruptcy, has not yet commented on the imminent agreement, only saying talks are in progress. But the firm had earlier said it was eyeing annual sales of about 400,000 vehicles in Iran by 2020.

In Italy, from where he flew to France, Rouhani has already industrial agreements worth billions of dollars. Besides the Peugeot deal, Rouhani is set to finalise the purchase of 114 jets from Airbus. French oil giant Total is also on the lookout for buying Iranian crude. Rouhani will also hold a joint press conference with French President Francois Hollande later in the day. The Iranian president is accompanied by more than 100 political and economic officials.

French oil giant Total is also looking to buy Iranian crude. Rouhani was due to hold a joint press conference with French President Francois Hollande later Thursday. The Iranian president is accompanied by more than 100 political and economic officials.