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 in November 2018.
There are no official figures on the amount of the money being held, but some sources have put it in the range of $7 billion, Iran’s Etemad daily newspaper reported on Wednesday.
Last December, Seoul-based Chosun Ilbo newspaper cited officials as saying that Iran’s Foreign Ministry had called in the South Korean ambassador to demand payment of 7 trillion won ($6 billion) for oil it sold to the Asian country.
According to the paper, Iran expressed “strong regret” over Seoul’s failure to complete the payment, which has been deposited at two South Korean banks without being transferred to Iran’s central bank for years. It added that other Iranian authorities including the central bank also complained.
A South Korean Foreign Ministry official said at the time the Iranian side had expressed its position that it hoped for the humanitarian trade to be resumed. South Korea, the official said, was in talks with Iran and the US frequently so that the shipments of humanitarian goods like medical supplies could be resumed using the won-based transaction system.
South Korea sent a delegation to Tehran last November and explained that the country would cooperate with the US to successfully complete transfer of the payment, it added.
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, with shipments likely to begin the following month.
The report said Seoul had 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.
Apart from the license program, South Korea was pushing for the Korean Humanitarian Trade Arrangement (KHTA), which uses an Iranian bank free from US sanctions — such as the Middle East Bank — to facilitate humanitarian transactions with the Islamic Republic, it said.
The country was also exploring ways to use the Swiss Humanitarian Trade Arrangement, a payment method designed to facilitate European companies’ sales of food and medicine to Iran, to carry out its transactions with Iran.
But to export medicine, Yonhap cited the strings attached, stating that medical equipment and other humanitarian products, companies and related financial institutions should undertake “enhanced due diligence” to ensure the exports would go to Iranians in need rather than being diverted by the Tehran government.
Last week, Yonhap said the United States “positively” viewed South Korea’s push to forge a payment mechanism to conduct humanitarian trade with Iran without fears of violating US sanctions on Tehran.
However, Etemad was downbeat. “Despite the promising news, Seoul is still stonewalling the way for Iran to collect the debt,” the paper said.
“According to several informed sources familiar with negotiations between Iran and South Korea, Iran has announced that in order to facilitate the work, it intends to use the financial resources available in South Korea to buy agricultural items as well as medicine – goods which the US Treasury has cleared for purchase,” it said.
However, “South Korea has tied Iran’s hands in choosing how to collect the debt for at least three year, most recently claiming that Iran can use the funds only to buy Korean-made goods for fighting the coronavirus,” the paper added, citing an informed source.
The South Korean proposal, Etemad said, comes while Iran is now fully stocked up on these items and is even exporting medical goods used in fighting the coronavirus.
“According to an informed Iranian source, currently there is need for medicine to fight special diseases, but South Korea has not agreed to supply them by using the blockaded funds,” it added.
Last month, 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.
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.
According to the document, London-based Iran International television channel falsely claimed that the SWIFT request had been made by a software company which sought to export non-medical goods to Iran.
Jahanpour released a second document which shows South Korea’s Mico BioMed, which develops and sells medical kits, had in fact presented the SWIFT request to the bank.
“The SWIFT request related [to Iran’s purchase of test kits] has been rejected by the Korean bank under the pretext of sanctions,” he said.
“This shows claims of medicine and medical equipment not being subject to sanctions are lies. The bank has officially stated that the purchase is not possible due to the sanctions,” Jahanpour added.
Under the US pressure, billions of dollars of Iran’s oil money and other funds are held up in several countries.
The assets held in foreign banks have been subject to a witch hunt by the Americans who have used Washington’s animosity toward the Islamic Republic to easily win lawsuits against the country in US courts.
Iran has denounced the practice as “highway robbery” and hauled the United States before the International Court of Justice (ICJ) at The Hague.
According to S&P Global Platts, rather than compelling the Trump administration to relax its oil sanctions regime, the global coronavirus pandemic and oil price crash is motivating an even more aggressive US oil sanctions policy, particularly in stopping petroleum flows out of Venezuela and Iran.
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.
Last month, South Korea’s Industrial Bank of Korea (IBK) said it had submitted to the US demand to pay $86 million in fine for processing Iranian transactions.