By Kim Jae-won
Woori Bank and Industrial Bank of Korea (IBK) are benefiting from the U.S. government’s economic sanctions on Iran as the two state-run lenders provide transaction services for Korean companies in the local currency when they trade with the Persian country, industry sources say.
The U.S. has banned financial companies across the world, including Korean lenders, from offering services in U.S. dollar to the Iranian government and firms since 2010 as part of economic sanctions on the country suspected of developing nuclear weapons.
The Korean government and the two banks, however, agreed with the Iranian central bank September 2010 to open banking accounts in Korean won, enabling companies in both countries to trade through them without violating the U.S. policy. Korean oil companies, such as SK Energy and Hyundai Oilbank, pay the crude oil bill in Korean won for Iranian exporters through the accounts and they get the money in Iranian riyal from the Iranian central bank.
Thanks to the agreement, Woori and IBK manage a combined 10 trillion won of funds per year, and have a few trillion won in deposits, respectively. The government allowed only the two state-owned lenders to manage the business due to security reasons.
Woori and IBK admit that they enjoy special treatment, but stressed that it was the government’s decision.
``We have nothing to comment on regarding the profits. It was the Strategy and Finance Ministry that gave us the business license,’’ said Woori official Park Yong-jun.
Profits, however, have been huge. According to data from the Financial Supervisory Service (FSS), Woori, which competes with KB Kookmin Bank for the title of the country’s largest bank, saw its Iran-related influx add 3.4 trillion won (about $2.9 billion) to its deposits last year. That alone was larger than the 2.9 trillion won Hana Bank, the fourth-largest lender, has in entire deposits.
The U.S. government seeks to find the exact amount of the funds, but the lenders declined due to confidentiality. Park said that the American Embassy in Seoul questioned the information, which the bank isn’t divulging.
The two banks may continue to bask in the benefits as Korea is likely to be excluded from the U.S. government’s new sanctions including the halting of crude oil imports from Iran. Government officials said last week that they got positive signals from the U.S. side that the nation will be included in the sanctions exemption list along with Japan and a number of European countries.
Korea, which has no domestic oil resources, wants to cut shipments from Iran rather than completely halt them since they make up about 10 percent of its total crude imports. The Ministry of Knowledge Economy said imports of Iranian crude fell 22 percent in the first quarter compared to a year earlier, to 17.73 million barrels.