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By Nam Hyun-woo
More than 2,100 companies here can no longer sell goods to Iran after two Korean banks and the Central Bank of Iran (CBI) halted won-denominated settlement services amid escalating U.S. sanctions on Tehran, according to industry analysts, Tuesday.
Since dollar-based trade between Iran and other countries was blocked in 2010, Korean firms have bypassed the trade restrictions by using won-based services offered by Woori Bank and the Industrial Bank of Korea (IBK). However, this may also be shut down after the U.S. ended sanctions waivers given to Korea and seven other countries.
The Korea Trade-Investment Promotion Agency said it had informed domestic exporting firms that financing for Korea-Iran trade based on won-denominated settlement services was no longer available.
In 2010, Woori Bank and the IBK opened their won-based accounts at the CBI so that Iranian buyers could pay Korean sellers by depositing rial into the central bank and Korean exporters could receive their payments by withdrawing won from Korean banks linked to the CBI. In return, Korean importers deposit won into Woori and IBK accounts at the CBI when they import oil and other goods from Tehran.
The banks stopped services on May 2 in line with the waivers ending the same day.
In November last year, the U.S. reinstated its Iranian sanctions but gave 180-day grace periods to eight countries ― Korea, China, India, Turkey, Japan, Greece, Italy and Taiwan ― to allow them to import Iranian oil. Korea has been requesting the U.S. to extend the waiver, but Washington said all countries will have to completely end importing Iranian oil.
Reportedly, the government demanded the U.S. allow the use of the won-denominated settlement service, saying it was separate from the oil waiver, but failed to win approval.
The banks said they have been informing companies about a potential freeze, thus the amount of receivables will not be great. However, industry officials said the freeze is expected to affect many small- and medium-sized manufacturers' future Iran-bound exports.
According to data from the Korea International Trade Association and the trade ministry, a total of 2,111 Korean firms exported goods worth $2.28 billion in 2018.
Of those goods, auto parts accounted for the most at $443 million as of October last year. These were followed by synthetic resin at $278 million and complete cars, $83 million.
"Companies have been lowering their trade reliance on Iran, wary of the U.S. reinstating sanctions, but many of them still have shipments en route," an industry official said. "With no possible way to address the situation on their own, companies will have no other option but to monitor the situation or lose customers."
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