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Seoul responds angrily to Iran threats over frozen assets

Julian Ryall Tokyo
July 23, 2020

Seoul has summoned Iran's ambassador to South Korea and lodged a protest over Tehran's threat to take legal action over the freezing of Iranian assets in South Korean banks. Julian Ryall reports.

South Korea responds angrily to Iran threats over frozen assets

Iran's ambassador to Seoul was summoned to the South Korean Foreign Ministry on Tuesday to lodge an official protest over reports that Tehran is contemplating legal action against Seoul over the freezing of Iranian assets.   

An estimated $7 billion (€6.06 billion) in Iranian funds are presently being held in two South Korean banks, although the assets have been frozen since September 2019, when a waiver granted by the United States for imports of Iranian oil expired.

Read more: Iran's millionaire mullahs, the military, and the fight for foreign currency

Iranian Foreign Ministry Spokesman Seyed Abbas Mousavi on Sunday warned of legal action in the International Court of Justice if Korea continued to refuse to pay off the money.

Mousavi also likened ties between Washington and Seoul to a "master-servant relationship" and said this was the reason Seoul was afraid of violating US sanctions on Iran.

Iranian Ambassador Saeed Badamchi Shabestari met with Koh Kyung-sok, director-general of the South Korean Foreign Ministry's division for African and Middle Eastern affairs, who expressed "regrets" over Mousavi's "inappropriate" comments.

"The official in charge called in the ambassador and expressed regrets over the inappropriate remarks," Kim In-chul, the ministry's spokesperson, told a regular press briefing, reported Yonhap news agency. "The Iranian side called for understanding and stressed that it was not the position of the Iranian government." 

Sanctions and security concerns

The funds frozen in South Korean banks were being used to pay for oil imports from Iran to South Korea and the export of goods to Iran. The payment mechanism between the two countries came to a halt when Washington — which is locked in a dispute over Tehran's nuclear program — ended the waiver granted on Iranian oil exports to South Korea.

South Korea has stopped buying Iranian oil since May 2019, when the United States stopped issuing the exemptions.

According to The Tehran Times, President Hassan Rouhani on June 14 ordered the governor of the nation's central bank, Abdolnasser Hemmati, to adopt "firm measures," including legal action, to force South Korea to release the funds.

Read more: The coronavirus in Iran: A nudge off the cliff?

Robert Dujarric, a professor of international relations at the Tokyo campus of Temple University, told DW that Tehran's demands indicate that it is increasingly feeling the impact of US sanctions.

"It's not only the sanctions, though," he said. "There are also concerns over oil prices and the coronavirus pandemic, so it appears that they are looking for any sort of financial gain that would be able to help them, at least in the short term."

The expert pointed out that the South Korean government is under pressure from Washington to strictly enforce the sanctions on Iran. "We must remember that Seoul is under a lot of pressure already from the US not to go soft on sanctions."

South Korea's major security concern remains North Korea and it relies heavily on US military support to ensure there are no military confrontations across the Demilitarized Zone that divides the Korean Peninsula. Seoul will be loath to antagonize Washington — with whom it already has a somewhat fractious relationship as President Donald Trump has repeatedly stated that Seoul should pay far more for the US troops stationed in the South.

No alternative?

Over the past several months, Seoul has been providing humanitarian aid to Tehran, including medicines and medical equipment. In June, Seoul set up a Foreign Ministry team to specifically expand humanitarian assistance to Iran, shortly after providing $500,000 worth of medicines.

But there is little the South Korean government can do on the matter of blocked Iranian funds, Rah Jong-yil, a former South Korean ambassador to Japan and Great Britain, told DW. He expressed surprise that Tehran did not comprehend that Seoul's hands were effectively tied.

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"South Korea is bound by these sanctions and the government in Iran must understand that Seoul is not acting through its own choice in the matter but because it is required to," he said. "These rules have been imposed on South Korea, as they have been imposed on other countries that have similarly frozen Iranian assets, so there is simply no alternative."

Rah emphasized that Seoul and Tehran have had a long and largely stable relationship for many years and he does not anticipate the present circumstances to impact those ties in the future, although he admitted that the relationship between Iran and the US appears to be bleak. 

"The only way that I can see these funds can be released is for the Iranian and US governments to improve their relationship, reach some agreements and for Washington to lift the sanctions," he said. "I agree, however, that appears unlikely at this point in time."