TEHRAN – After months of a bitter dispute over Iranian assets frozen in South Korean banks due to the United States sanctions, Tehran and Seoul seem to be inching towards an agreement on unblocking the assets.

Iran has announced that it reached a deal with South Korea on how to release its assets blocked in South Korean banks.  Abdolnasser Hemmati, governor of Central Bank of Iran (CBI), met with South Korean Ambassador to Iran Ryu Jeong-Hyun on Monday.

Following the meeting, state news agency IRNA reported that at the meeting, the necessary agreements regarding the transfer of assets to the intended destinations were made and the South Korean side was informed of the decisions of the CBI regarding the volume of transferred assets and the destination banks.

The South Korean ambassador expressed his country’s readiness to facilitate the unblocking of Iranian assets.

“The country is ready to take all necessary measures to use all of Iran's banking assets in South Korea, and there are no ceilings or restrictions in this regard,” Jeong-Hyun was quoted as saying by IRNA.

Hemmati welcomed the change in South Korea’s approach toward Iran, adding that the Islamic Republic, although welcoming the increase of cooperation with other countries, retains the right to legally prosecute South Korea and demand compensations from it for not cooperating with Iran over the past two years.

“The [South] Korean side must do its utmost to erase this bad precedent,” the CBI governor noted.

South Korea was quick to offer an explanation of what happened during the Monday meeting between Hemmati and Jeong-Hyun.

South Korea’s Foreign Ministry said on Tuesday that the Iranian assets locked in South Korea will be released after consultations with the United States, Yonhap News Agency reported, without denying Iran-South Korea negotiations over unblocking the assets.

“Our government has been in talks with Iran about ways to use the frozen assets, and the Iran side has expressed its consent to the proposals we have made,” the South Korean Foreign Ministry told Yonhap News Agency.

“The actual unfreezing of the assets will be carried out through consultations with related countries, including the United States,” the ministry continued.
 
According to Yonhap, earlier this month a South Korean Foreign Ministry official said Seoul was finalizing talks with Washington about using some of the frozen funds to pay Tehran’s UN dues in arrears, to which the Islamic republic has also agreed. To facilitate the trade with Iran of humanitarian items, such as medicine and medical equipment, South Korea has been seeking to use a Swiss channel backed by the U.S., known as the Swiss Humanitarian Trade Arrangement (SHTA), to use the money through Swiss companies' sales of goods to Iran, the news agency added.

Tehran and Seoul have been locked in a bitter dispute over Iran’s blocked assets in South Korea, with the seizure of the South Korean ship in early January being the latest in a series of disagreements between the two Asian countries. Some 7 billion dollars of Iranian oil revenues have been frozen in two South Korean banks since September 2019, when Washington's sanctions waiver for South Korea's imports of Iranian oil expired.

In January, Yonhap claimed that Iran was seeking to use its money frozen in South Korea to buy medicine.

Citing a diplomatic source in South Korea, Yonhap claimed that Iran made a request to South Korea for the use of the frozen money to purchase medicine, medical equipment and COVID-19 vaccines from the COVAX Facility, a global vaccine procurement mechanism.

The issue of Iran’s funds was one of the main issues that were discussed during South Korea’s First Vice Foreign Minister Choi Jong-kun’s visit to Tehran in January.

A few weeks after the visit, Iran proposed paying its UN membership fees with its seven billion dollars frozen in South Korea.  

“We should have paid $16 million to settle our debts to the UN and secure our right to vote. The government allocated the fund and urged that the country’s frozen assets in South Korea be used [to pay the debts], but the U.S. blocked the payment to the UN account,” Iranian Foreign Minister Mohammad Javad Zarif said in January.

At that time, Saeed Khatibzadeh, spokesman for Iran’s Foreign Ministry, also echoed the same proposal. Khatibzadeh said, “Iran’s latest proposal in this regard was to pay this debt by having the UN use Iran’s seized assets in South Korea with the permission of the central bank, which is being discussed with the UN Secretariat and the necessary arrangements are being made.”

Iran and South Korea appear to be moving toward settling the thorny issue of Iran’s assets after a few rounds of failed negotiations in January. They are eager to find a solution to the issue. Over the past few months, both of them had proposed a number of solutions none of which broke the deadlock over the assets.

During the January negotiations, South Korea proposed to barter the whopping $7 billion of Iran’s assets blocked in South Korean banks for ambulance vehicles and coronavirus test kits, a proposal decried by Iran as “shameless.”

During his visit to Iran, Jong-kun met with Iran’s central banker to discuss how to release the Iranian assets. According to Iranian media, the South Korean diplomat proposed to provide Iran with ambulances and coronavirus test kits using Iran’s assets. But Iran rejected the offer, saying that it wants to use the money to purchase foods and medicines. Iran also said that the Korean proposal did not include the release of all Iran’s frozen assets.

With the negotiations still going on, Tehran and Seoul seem to be in the final stage of resolving the assets issue given South Korea’s close contacts with the Biden administration, which has promised to rekindle diplomacy with Iran by reviving the 2015 Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA).