Iran was South Korea’s third-largest Middle Eastern trade partner before the US imposed sanctions on Iran in 2015. The United States unilaterally withdrew from a 2015 nuclear deal between Tehran and world powers followed by the reimposition of crippling sanctions on the country.
The trade between Iran and South Korea comprised of Iran is a key oil supplier to resource-deprived South Korea and in turn imported industrial equipment, household appliances, and vehicle spare parts from Seoul.
Iranian lawmaker Alireza Salimi, who is involved with the case said, “We have $7.8 billion of our money blocked in South Korean banks. It is not a reliable trading partner and it should pay interest on the money it is improperly holding.”
A foreign ministry official in Seoul told reporters that “it is difficult to confirm” the exact amount of money involved in the case.
Following former US President Donald Trump’s decision to exit from the nuclear deal in 2018, reimposing the severe sanctions and threatening countries that anyone involved in purchasing oil from Iran will face harsh consequences, South Korea stopped buying Iranian oil.
As reported by Iran’s embassy in Seoul, Iran-South Korea trade slashed to half in 2018 in comparison to 2017 when it had stood at $12 billion. The volume of trade plunged to $111 million by mid-July 2020, as per the embassy’s data.
Earlier in January, Iran’s Revolutionary Guards detained a South Korean-flagged tanker, called Hankuk Chemi, and seized it and the captain for three months, allegedly over environmental violations.
South Korea saw the move as an attempt to force its hand over the frozen funds, but Tehran repeatedly denied there was any connection.
Turning a blind eye
Last week, Iran’s Foreign Minister Hossein Amir-Abdollahian cautioned that Iran would sue South Korea if it failed to honor its debt any longer. He said, “US pressure [on Seoul] is a fact but we cannot continue… to turn a blind eye to this question”.
He added that if Seoul continued to refuse to unblock the funds, the Iranian government would grant permission to its central bank to pursue legal action against two South Korean lenders responsible for holding the money.
Amir-Abdollahian reported that he had spoken to his South Korean counterpart Chung Eui-Yong regarding the issue last month. He said, “I told him it was unacceptable for our people to wait for three years” for the funds.
The foreign ministry official in Seoul has said that there seems to be no way to make the payment because of US sanctions. He said,” We have been transferring the cost of crude oil imports to a Korean won account under the name of the Iranian central bank. And when a South Korean company exports to Iran, it receives payments from that account in Korean won”.
The official added that the country has already used the frozen fund to pay around $16 million in Iranian arrears to the United Nations.
President Joe Biden’s administration has said that it is willing to lift the sanctions and resume the 2015 deal but the talks have stalemated.
US point man on Iran, Rob Malley has spoken with South Korean Vice Foreign Minister Jong Kun Choi on Thursday via telephone.
State Department spokesman Ned Price said, “We appreciate [South Korea’s] vigorous enforcement of existing sanctions. These sanctions do remain in effect, as you know, until and unless we are able to reach that mutual return to compliance”.
Lawmaker Salimi said the US had allowed South Korea to supply Iran with merchandise in lieu of returning the funds.
South Korean foreign ministry said that “for now, only humanitarian transactions, such as medicines, are possible with frozen funds.”
Earlier last month Iran’s President Ebrahim Raisi implemented a ban on the import of household appliances from South Korea, under the direction of supreme leader Ayatollah Ali Khamenei.
Khamenei said imports would be detrimental to local production. South Korean appliances continue having a strong demand despite the ban.
Head of Iran’s appliances sector union said that the local home appliance market is worth $6 billion per year, out of which 40 percent is contraband goods smuggled in from abroad.
Maryam, a bride-to-be shopping in Tehran’s Amin-Hozour street, a hub for household appliances, said she preferred to buy foreign products because “the quality is better and the prices are not so different from what is produced locally.”
Amine Feizi, a machine operator, said he had bought a fridge, a washing machine, and a television set, all made in the Islamic republic. He said, “I prefer products made in Iran because foreign ones are more expensive and because I want to support national production. In the years since our country has been under sanctions, the quality of Iranian-made products has improved.”
