Are Tehran's demands unreasonable?

From left: the Industrial Bank of Korea headquarters in Seoul, Iranian President Hassan Rouhani, and the Woori Bank headquarters in Seoul / Korea Times file

Woori, IBK silent on Iranian government's threats

By Park Jae-hyuk

The Iranian government's attempt to regain access to its oil export revenue, which was seized in Korea amid Washington's economic sanctions, is leading to concerns that the situation could develop into a legal battle for Woori Bank and the Industrial Bank of Korea (IBK), both of which have taken charge of the Middle Eastern country's frozen accounts here.

But the Korean banks have remained silent about possible threats from Tehran, apparently being cautious about possible involvement in a diplomatic tussle with both Iran and the United States.

Sources familiar with the issue blame Iran, claiming Tehran was making "unreasonable demands and false claims" as the pandemic is increasingly weighing on its economy amid the intensifying U.S. sanctions.

The Tehran Times was the first to report that the Iranian government is considering filing lawsuits against the Korean banks to regain access to its frozen accounts. The reports came as Iranian President Hassan Rouhani said South Korea's seizure of Iranian assets "was by no means acceptable and we expect Seoul to lift the restrictions as soon as possible."

Central Bank of Iran (CBI) Governor Abdolnaser Hemmati also said his country could launch legal action to gain access to the funds, according to the English language daily. The CBI has already filed lawsuits in Europe against financial firms that have withheld its money.

"If South Korea continues to block the Iranian frozen funds then it is a clear indication that Seoul is continuing to put U.S. interests first, and with that South Korea is forfeiting its sovereignty and its relations with other nations," the Iranian newspaper reported. "By doing so South Korea will sacrifice the Iranian nation's trust in that country's products and technology which was gained in recent decades, and in the long run Seoul will sacrifice its interests in the Iranian market."

Both Woori and IBK said they have yet to take any measures, because they are not being sued.

"We've not faced any lawsuit, so we've just kept a close watch on this issue," an IBK spokesman said by telephone.

With the approval of the U.S. government in 2010, Korea and Iran could trade with each other using Korean won-based settlement accounts that the CBI had opened at Woori and IBK.

However, the banks stopped providing their won-denominated settlement services in May last year after the U.S. ended sanctions waivers given to Korea and seven other countries. The resumption of the services has become more difficult, since Washington tightened its sanctions against the CBI in September last year, following Iran's alleged drone attacks on Saudi Arabia's Aramco oil refinery.

Iran-South Korea Joint Chamber of Commerce Chairman Hossein Tanhaee claimed the amount of Iran's blocked assets in South Korea was somewhere between $6.5 billion and $9 billion. He also alleged Woori has demanded Iran pay a maintenance fee and that the Korean government is using the money.

But a banking industry insider disputed these claims.

"Woori has continued to pay interest on Iran's deposits without demanding any maintenance fee. If the U.S. lifts its sanctions against Iran, the CBI will be able to get its principal back with interest," the source said. "Iran must be aware of that the sanctions have barred the Korean banks from paying them back, but the country seems to be making such demands because its economic condition has deteriorated further."

The government has also resumed the won-based trade of certain products with Iran starting this month, so that the Middle Eastern country could import face masks and protective equipment to further prevent the spread of COVID-19.

Launching a taskforce in June to increase humanitarian trade with Iran, the Ministry of Foreign Affairs recently held a presentation for companies interested in exporting medicine, medical appliances, agricultural products and groceries to Iran.

"Supporting Korean companies to expand humanitarian trade with Iran, we will continue negotiations with relevant countries, such as the U.S. and Iran," a foreign ministry official said in a statement.

It will be difficult for the Korean banks to give back Iran's oil export revenue in cash for a while because the government has conducted "enhanced due diligence" on products exported to Iran, so that the products are not used for money laundering.

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