Seoul somehow shooting itself in the foot by refusing to release funds

Seoul may lose Iranian market forever

August 3, 2020 - 23:20

TEHRAN-Iran and South Korea are locked in a dispute over Seoul’s decision to block Iranian assets due to U.S. sanctions. An analyst tells the Tehran Times that the South Korean procrastination could impinge on Seoul-Tehran ties and lead to South Korea’s loss of the Iranian market.

In a step to settle the issue of Iran’s assets, South Korea reached an agreement with Iran to launch a working group on expanding humanitarian trade as part of efforts to maintain bilateral partnership within the scope of a U.S.-approved sanctions exemption, Yonhap news agency reported on Sunday.

Citing a source familiar with the matter, the agency said that the two sides reached the agreement during their higher-level virtual talks held earlier this week, adding that in the talks, the Iranian side expressed intent to purchase several hundred millions of dollars worth of South Korean products.

According to the agency, the Iran-South Korea humanitarian trade agreement  is also expected to help the two countries settle the issue of Iran's assets -- known to be worth up to US$7 billion -- frozen in two Korean bank accounts since last year due to Washington's tightened sanctions against Tehran.

The agreement was reached against a backdrop of increasing diplomatic tensions between Tehran and Seoul over the blocked assets, with some Iranian officials even threatening to take legal actions against South Korea ranging from filing lawsuit against it to introducing a double-urgency motion in the Iranian Parliament to ban imports of South Korean goods.

“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 U.S. sanctions,” Abdolnaser Hemmati, the head of the Central Bank of Iran, told Bloomberg on July 10. He threatened that Iran could launch legal action to gain access to the funds.

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

The CBI governor also said that Iran and South Korea have been working on a special trade vehicle, which would allow Iran to complete humanitarian transactions using the money locked in Korean banks. However, it seems that the two countries’ talks were not going smoothly. That was maybe the reason that pushed an Iranian lawmaker to threaten South Korea with a double-urgency motion to ban imports of goods from South Korea in case it failed to release the Iranian funds.

“If South Korea fails to carry out its undertakings in the negotiations and shows lack of commitment again, the Parliament will devise a double-urgency motion to prohibit imports of all types of [South] Korean goods,” Mohsen Alizadeh, a member of the Parliament's Economic Committee, told the Tasnim news agency on July 30.

With South Korea ultimately agreeing to launch a working group on expanding humanitarian trade with Iran, it seems that Iranian warnings haven’t fallen on deaf ears in Seoul. It’s likely that the South Koreans have finally decided to avoid a further deterioration in their country’s relations with Iran by finding a way to release the Iranian assets. If true, this could reflect positively on Iran-South Korea relations, because any South Korean procrastination could have delivered a severe blow to the ties between Tehran and Seoul.

Iran is big market for South Korean goods, including home appliances and cellphones, according to Behzad Shahandeh, a university professor specializing in East Asia affairs.

“However, South Korea’s refusal to release the Iranian assets would definitely impinge on Iran-South Korea relations,” Shahandeh told the Tehran Times.

South Korean brands have made great strides in the Iranian market over the past few years, but Seoul’s possible adherence to the U.S. unilateral sanctions on Iran could lead to loss of the Iranian market, because Iran may refuse to let Korean brands once again make strides in the Iranian market.
“South Korea’s stance on the Iranian funds will certainly have a negative effects on Tehran-Seoul ties,” Mehdi Safari, Iran’s former ambassador to China, told the Tehran Times, adding that South Korea’s behavior towards Iran is “very unfair.”

“It’s very unfair and immoral that South Korea even refuses to give back Iranian funds with its currency, [South Korean won],” Safari noted.

Shahandeh also said that the Iran-Korea agreement to launch a working group on expanding humanitarian trade is “a positive step forward”, calling on the two countries to follow up on their efforts and continue exchanging views on matters of bilateral interests.

“We need to dispatch a strong delegation to South Korea,” pointed out Shahandeh, adding that Tehran and Seoul relations are currently facing ups and downs, but this problems are unlikely to have a negative effect on the relations in the long-run.

Considering South Korea’s procrastination, some analysts believe that Iran should form a strong team and send it to Seoul to explore all legal and financial ways of getting its funds back home. In addition, some analysts hold the view that ethically Seoul has no rights to block the assets, because these assets can strengthen Iran’s efforts in the fight against the novel coronavirus.

Hemmati has said that the South Korean banks’ refusal to release the assets was preventing Iran from using its money to buy foods and medicines.

The first working group talks are expected to be held early next month. Meanwhile, the Iranian Foreign Ministry said in statement on July 30 that the CBI assets in South Korea were the main issue in Iran’s relations with South Korea and dozens meetings have been held in Tehran and Seoul to settle it. The statement also said filing lawsuit against some South Korean banks is underway. This means that South Korea, in addition to losing the Iranian market, could face legal actions too.

With respect to South Korea’s exports to Iran, Alizadeh said that South Korean products, including home appliances, cellphones and cars, have seized a big share in the Iranian market.

“A large volume of home appliances, mobile phones and cars in the Iranian market are allocated to South Korean goods, and if we do not import them, a large part of South Korea goods will face problems. If the South Korean officials fail to fulfill their obligations, the Parliament will certainly pursue the ban [on South Korean goods],” Alizadeh warned.

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