The Korean government, which prefers on imports of Iranian oil despite U.S.-led sanctions on the Islamic country, has asked the U.S. to exempt major Korean companies from the sanctions to allow them to continue trade with Iran.

Negotiations with the U.S. are drawing attention, as rejection of the request could cost Korea 7.2 billion U.S. dollars in annual export losses. Including Samsung Electronics and Hyundai Motor, the companies in question are also reacting sensitively in asking the government of the possibility of an export embargo. 

According to a senior Korean official, a Korean Strategy and Finance Ministry asked Robert Einhorn, the U.S. State Department`s adviser for sanctions on North Korea and Iran, if Washington would exempt Korean banks from the sanctions so that they can continue transactions with Iran. The inquiry is apparently a request that the U.S. allow Korean companies to continue exports to the Islamic country.

The U.S. National Defense Authorization Act blocks financial transactions with Iran and imposes sanctions on businesses making general trade transactions with the Mideast country 60 days after the law takes effect. The law gives a longer grace period of six months for oil imports. Since the law took effect Jan. 1 after U.S. President Barack Obama signed it late last month, Korean companies exporting to Iran will be subject to the sanctions from early March.

The law has an exception clause, however, that allows foreign banks that the U.S. government recognizes to be owned or controlled by their governments to continue financial transactions with the Iranian central bank. The Korean government`s request to Einhorn is based on the clause.

Since 2010, Korean companies have been allowed to receive payments for exports to Iran only through won-denominated settlement accounts opened at Woori Bank and Industrial Bank of Korea, which are controlled by the Korean government. Therefore, if the U.S. rejects exemption for the two banks from the sanctions, this will block many Korean companies from exporting to Iran.

More than 2,200 Korean companies are exporting products to Iran. For 281 of the firms, sales generated from Iran account for more than half of their foreign business. The ratcheting political tensions between Iran and the West have certainly provided Korean firms the chance to exploit the dramatically reduced presence of American and European firms in the Middle Eastern nation.

Local technology makers Samsung Electronics and LG Electronics have cemented leadership in markets such as consumer electronics and mobile phones. 

Soaring inflation and falling exports are high on the list of concerns for Korean policymakers. Both could be made dramatically worse by the standoff between Iran and the West.

While fears of another oil spike have been climbing as the war of words intensifies between Iran and Western nations, Korea, an economy over-reliant on exports, is also concerned about the possibility of temporary losing one of its biggest markets in the Arab world.

Just as serious for government officials is the Iran standoff dealing another blow to exports, which account for around half of the Korean economy, that are already reeling from the effects of the eurozone debt crisis and sluggishness in major markets, the U.S. and China.