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Iran may take legal action to access funds in South Korea

Governor of the Central Bank of Iran Abdolnaser Hemmati says the Islamic Republic may launch legal action to access its funds illegally being withheld in South Korea under pressure from the US.

Korean banks are preventing Iran from using billions of dollars of its oil money to buy foods and medicines which are apparently exempt from US sanctions, Hemmati told news and financial information provider Bloomberg.

“It is appalling to see that Korean banks have conveniently neglected their obligations, common international financial agreements, and decided to play politics and follow illegal and unilateral US sanctions,” he said.

“Should Korean banks not adhere to their international agreements with us, we reserve our rights to take legal actions under international laws,” Hemmati added.

$7 billion in arrears

Iran’s Foreign Ministry said earlier this month that South Korea was about $7 billion in arrears for oil exported from the Islamic Republic before the Trump administration reimposed sanctions on Iran’s oil industry in November 2018.

South Korea was the biggest client of Iranian gas condensate with 300,000 barrels per day (bpd) on top of 100,000 bpd of crude oil, but the country stopped the imports even before US sanctions on Iran’s oil industry went into effect.

After sanctions were lifted under the 2015 nuclear deal, Iran managed to unlock over $6.4 billion of oil payments trapped in Indian accounts.

Even, the United States settled a long-standing Iranian claim at the Iran-US Claims Tribunal in The Hague, releasing $400 million in funds frozen since 1981 plus $1.3 billion in interest that was owed to Iran, in 2016 when Barack Obama was the president.

Iran and South Korea have been working on a special trade vehicle, similar to that established with the European Union, which would allow Iran to complete humanitarian transactions using the money locked in Korean banks.

Last month, state news agency Yonhap said South Korea had won US approval for the resumption of humanitarian exports to Iran under a special license program.

Iran announced earlier this month that it had received medicines valued at $500,000 from South Korea after two years of negotiations.

Foreign Ministry spokesman Abbas Mousavi was sarcastic when he was asked at a news conference in Tehran to comment on the shipment of the Koreans. “They have gone through a lot,” he said.

According to the Foreign Ministry in Seoul, the drugs shipped were for the treatment of genetic diseases and that South Korea planned to ship COVID-19 test kits worth $2 million.

Seoul has gained the General License No. 8 from the US government — a mechanism to authorize certain humanitarian transactions with Iran even if they involve Iran’s central bank subject to US sanctions, Yonhap said last month.

Korean banks using Iran money to boost reserves?

However, South Korea has tied Iran’s hands, most recently demanding that Iran use its frozen money to buy only Korean-made goods for fighting the coronavirus – items which Iran is now fully stocked up with and is even exporting some of them, Tehran-based Etemad daily reported last month, citing an informed source.

“We have substantial amount of funds, billions of dollars in fact, in Korean banks. These are our funds, it is our prerogative to use these funds to import whatever we deem needed for our people. However, given the US’s illegitimate and illegal unilateral sanctions on our trade and financial transactions, we face difficulty utilizing our funds abroad,” Hemmati told Bloomberg.

“It is a shame that our long-time trading partners fall to US’s traps and create hurdles for further cooperation. Let me put it bluntly, would you put your hard-earned money in a bank and then negotiate with the bank to let you spend it? This is bad business,” he added.

In April, Iran’s Health Ministry said South Korea had rejected a SWIFT payment request by Tehran for purchase of coronavirus testing kits over the US sanctions.

Former ministry spokesman Kianoush Jahanpour released a document that showed a Saudi-funded TV had asked a Korean bank to reject the request. “As a result, the Korean bank rejected Iran’s request and the kits were not delivered to Iran,” he said.

Hemmati said, “We are simply asking Korean banks, to let us use our money and import humanitarian goods, including foodstuffs, medicine, and medical equipment. These items are already exempt from US sanctions. This is not too much to ask.”

“I have difficulty understanding the hesitation by Korean banks, unless, they are playing games and using Iran’s money to boost their own reserves, I hope I am wrong here.”

South Korean Finance Minister Hong Nam-ki (L) meets with Central Bank of Iran Governor Abdolnaser Hemmati at the government complex in Seoul on June 6, 2019.

South Korea was among Iran’s major trade partners before falling in line with US guidelines after Washington withdrew from an international nuclear deal with Tehran in 2015 and imposed unilateral sanctions on the Islamic Republic.

Iran was South Korea’s third biggest export market in the Middle East and companies such as Samsung and LG Electronics were among popular brands for TV sets, air conditioners, telecommunications equipment and washing machines.

Iranian officials have said Tehran would not forget its “true friends” who stayed on its side during hard times and those who left it alone.

‘Economy getting back on track’

In his interview, Hemmati said Iran’s sanctions-hit economy was also weathering the coronavirus crisis well.

“The economy is getting back to track and we see signs of solid economic activity. I am confident that, while the human cost of the outbreak remains devastating, we will manage the economic fallouts,” he said.

“I am not sure we will see the same order of negative impacts that European countries and the U.S. are experiencing. I think we will see moderate growth this year,” he added.

Hemmati said the main driver of Iran’s economy is now the non-oil sector after years of extreme reliance on oil revenues.

“Although the government budget was tilted more toward the oil revenue in the past, we have taken corrective actions to remedy this once and for all.”

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