The Seoul branch of Iran-based Mellat Bank may be on the brink of shutting down as South Korea is increasingly pressured to fully support U.S. sanctions on the Middle East nation.

Sources have said that the bank was found to have engaged in “obscure” transactions during a regular checkup on the bank recently conducted by financial authorities here.
There were two other Iranian companies operating in South Korea that were on the Washington blacklist, but the fate of Mellat appeared to be the trickiest issue, as the bank handles most of the financial transactions for South Korean companies doing business in Iran.
Closing it down could be a symbolic yet emphatic gesture, those close to the matter said, and also may help Washington persuade China to follow South Korea’s example.
It also would mean, however, that South Korea may be at risk of losing its lucrative business with Iran, not to mention access to its oil.
There are procedural issues to consider as well, financial officials said, as the obscure transactions must be of a significant level, or else the bank’s financial health should be in jeopardy in order for the government to justify a shut-down.
Officials so far have said they are considering their options.
“Relations with both the U.S. and Iran are important to us,” said one Foreign Ministry official.
South Korea has a strong alliance with the U.S., but it also has a multi-billion dollar trade business with Iran.
Iran also exports oil to South Korea, which has no significant natural resources of its own.
The U.S. Treasury Department on Tuesday announced the detailed enforcement regulations regarding Washington’s new sanctions on Iran it unveiled earlier this year in additional measures to punish Iran after the U.N. Security Council issued sanctions of its own in June.
The accusation against Iran is that it has engaged in unauthorized development of nuclear weapons programs.
The sanctions were designed to effectively prevent the financing of Iran’s alleged nuclear weapons development program and isolate Iran from international society as the U.S. is at the center of global financial systems.
Those who fail to abide by Washington’s sanctions are to be fined up to $250,000 or twice the amount of the transaction. If found to be an intentional refusal to uphold the sanctions, they could be fined by up to $1 million and serve 20 years in jail.
South Korea, as a member of the U.N., is bound to adhere to the organization’s sanctions on Iran, but not those stipulated by Washington.
Yet, many believe Seoul will have no choice but to comply, as the U.S. has been clear about seeking South Korea’s support when the State Department’s financial adviser Robert Einhorn visited early this month.
The Iranian government appeared to be disturbed by the forecasts, as reflected in comments by the Iranian ambassador here in recent interviews, during which he warned that South Korean firms would forfeit their Iranian markets if Seoul joined the U.S. sanctions.
(Source: The Korean Herald)