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New U.S. sanctions on Iran put Korea in tight spot

Published: 09 Dec. 2011, 22:23

An additional round of tough U.S. sanctions against Iran to deepen the regime’s isolation is putting renewed pressure on Seoul to stop importing oil from the Middle Eastern country, which makes up 10 percent of Korea’s annual crude demand.

The sanctions, approved by the Senate last Thursday, bar foreign financial institutions that conduct business with the Central Bank of Iran from operating in the United States. The House is expected to approve the new sanctions soon.

The latest round, which builds sanctions imposed by the White House on Nov. 21, are said to be so tough that the Obama administration is pressuring Congress to ease the measures.

The congressional action comes after the IAEA recently confirmed that Iran was continuing to pursue its nuclear weapons program, with many U.S. lawmakers coalescing around the need for stronger sanctions, particularly among pro-Israel lawmakers.

If the sanctions become official, Korea, which has been asked to participate in the U.S. effort, may find itself having to entirely suspend its crude oil imports from Iran.

In the first 10 months of this year, Korea imported 74.23 million barrels of crude oil, worth $7.8 billion, from Iran, equivalent to 9.6 percent of its total crude oil import in the same period. Last year, it was 8.3 percent.

All of Korea’s financial transactions for doing trade with Iran, including oil, are done between two major Korean commercial banks - Woori Bank and Industrial Bank of Korea - and Iran’s central bank.

“We’re looking at various options including importing from other countries other than Iran such as Saudi Arabia,” said an official from the Ministry of Knowledge Economy. “We could also ask the United States to ease sanctions related to Iranian oil imports.”

Jeon Gwang-uk, foreign exchange manager at Industrial Bank of Korea, said Korea’s small and mid-size companies could be affected by the sanctions, in addition to oil imports. The Korea International Trade Association said the country imported $10.9 billion worth of goods from Iran while Korea exported $6.1 billion to Iran from October 2010 to October 2011.

Some officials in Seoul, however, say that the two Korean banks’ transactions for nonpetroleum goods and services would be unaffected because the U.S. bill exempts foreign central and state-owned banks when it comes to nonpetroleum products. That exemption, they said, could apply to Woori and IBK because the government holds more than a 50 percent stake in each.

The official added that the bill gives the U.S. president the right to waive the sanctions if he determines that a participating country has insufficient alternative oil supply or the national security of the country is compromised.

“If we look deeply into the bill, there appears not to be as serious of an impact on us as people thought,” said an official from the Ministry of Foreign Affairs and Trade. “Nonetheless, we will try to explain well to the U.S. our situation and seek cooperation.”

Meanwhile, Korea’s government could announce its stance on the U.S. government’s request for cooperation on the earlier Nov. 21 sanctions as early as this month, the Foreign Ministry official said. Robert Einhorn, the U.S. State Department’s special adviser for nonproliferation and arms control, met officials here this week on the issue.

“If there are additional sanctions on Iran, it would be an extension in the scope and target of existing sanctions,” said the Foreign Ministry official.

By Moon Gwang-lip, Limb Jae-un [[email protected]]