By Kim Tong-hyung
The government is scrambling to minimize the damage to Korean businesses arising from the United States’ fresh sanctions against Iran over the country’s nuclear program. One of the ideas suggested to protect Korean exporters was to use the banks in a third country, such as the United Arab Emirates (UAE), to deal with financial transactions between companies and their Iranian business partners.
“Trading with Iran through letter of credit (L/C) transactions has become virtually impossible under the newly imposed financial sanctions by the U.S. So we must consider other methods such as ‘telegraphic transfer’ that is based on the Iran-based business units wiring money to a non-Iranian bank,” said an official from the Ministry of Knowledge Economy.
As tension escalates over Iran’s nuclear program, South Korea finds itself stuck in an awkward situation. In principle, Korea is in favor of the United Nations’ fourth round of sanctions against Iran and the U.S. efforts to further tighten financial curbs. However, limiting business losses is also a priority as Iran used to be South Korea’s largest trading partner in the Middle East.
Iran bought more than $4 billion worth of South Korean products and services last year, and local companies are worried about losing a significant chunk of this market. According to a survey of 72 exporters by the Korea Federation of Small and Medium Businesses, about 56 percent of the companies predicted that the new sanctions against Iran will affect their business in a negative way.
Under a telegraphic transfer arrangement, Korean companies can have their Iranian clients conduct a wire transfer that sends the money to a non-Iranian bank, which could then forward the sum to South Korean banks. Although there is nothing state-of-the-art about this transfer method, the government officials say that such transactions may be inevitable to prevent a halt in business activities. However, the contingent transfer method, if approved, will only be permitted for sectors that were excluded from U.S. sanctions, such as crude oil imports, ministry officials said.
The U.S. has been putting stronger pressure on governments and businesses around the world to prevent them from engaging in business activities in Iran.
Last week, U.S. envoys, led by Robert Einhorn, the State Department’s special adviser for nonproliferation and arms control, visited South Korea to discuss the details of U.S. sanctions on Iran and North Korea with policymakers here.
According to the U.S. Treasury’s Office of Foreign Assets Control (OFAC), three South Korean units of Iranian companies, including Iran Petrochemical Commercial Company, the CISCO Shipping Company and the Seoul branch of the Bank Mellat, are among entities included on the U.S. sanctions list.