Korea’s Iran sanctions may end up at symbolic level

By Cho Jin-seo

Korea will follow the U.S. lead and impose sanctions on Iran but their severity, regarding a branch of an Iranian bank in Seoul, will likely end up as symbolic rather than substantive, officials here said Friday.

A Seoul delegation is now in Washington to fine-tune the level of punitive measures. A separate delegation will visit Tehran.

The officials said that Korea is not in a position to go as hard as the U.S. wants on Iran because of its close trade ties with the Middle Eastern country, among other factors.

“What we will do with Iran will be the level of a ‘gesture,”’ an official told The Korea Times. The word, used in everyday conversation in Korea, oftentimes means a move with no heart or a step taken to just placate a counterpart.

“We will try to make room for further talks via direct and indirect channels,” he said.

The remarks come at a time when firms doing business in the Middle East are demanding the government help them survive the U.S.-led sanctions. Some of them have already lost big contracts as a result of the aggravated relationship with Iran.

“Companies are complaining that the government should let them carry on their businesses with Iran as long as the deals are not related to weapons of mass destruction or nuclear bombs,” said Kim Yong-suk, chief of the Middle East team at KOTRA, the state trading assistant agency. He estimates some 2,000 Korean firms will be affected by the international sanctions.

At the center of the controversy is Bank Mellat, an Iranian state bank that has its only East Asia branch in Seoul, which has been under an audit by financial regulators. An official of the Ministry of Strategy and Finance said evidence of wrongdoing found was not as strong enough to justify severe punishment, such as the closure of the branch.

“Not all, but many of Korean exporters to Iran have used Bank Mellat for receiving payment,” Kim of KOTRA said. “Small firms are more vulnerable because they do not have financial firewalls like big firms do.”

On Wednesday, the government announced a financial rescue plan for companies that may be adversely affected by sanctions on Iran. Under the plan, the government will provide small firms with 18-month rollovers on maturing loans, and offer new loans of up to 500 million won for three years at low rates.

An official at the financial regulating body said the rescue plan should be seen as a gesture of goodwill to Iran.

“Its message is that the Korean government is helping firms doing business with Iran, which are struggling not because of Korea’s own sanctions but because of sanctions imposed by other countries,” he said.

Iran is Korea’s 15th largest trading partner, and the volume of exports and imports increased significantly in the first half of this year. Direct trading between the two countries amounted to some $10 billion last year.

Korea and the United States have been strong military and diplomatic allies since the Korean War. On the other hand, Iran and Korea have maintained a friendship mostly in economic and social activities. Korean cars, electronics, TV dramas and taekwondo are popular in Iran, while Iran supplies about 10 percent of Korea’s crude oil demands.