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Bracing for a thaw in U.S.-Iran ties

Published: 20 Sep. 2023, 20:26

South Korea has returned $6 billion to Iran after the money for importing Iranian oil had been frozen for the last four years under U.S. sanctions. The Foreign Ministry and the Finance Ministry confirmed that the dues to Iran locked in Korean banks under the sanctions were delivered to Iran through a third country with the help of related governments.

The funds were unlocked as a part of the agreement between the United States and Iran to free Americans detained in Iran in exchange for Iranians jailed in the United States. The exchange took place ahead of Iranian President Ebrahim Raisi’s trip to New York to attend the UN General Assembly at the mediation of Qatar.

The oil payment was frozen after former U.S. President Donald Trump in 2018 upended the Iran nuclear agreement known as the Joint Comprehensive Plan of Action (Jcpoa) that global powers, including the U.S., signed with Tehran in exchange for the dismantlement of its nuclear program. The Industrial Bank of Korea (IBK) and Woori Bank were responsible for settling oil imports from Iran through the Iranian central bank’s account in the two Korean banks. The funds were locked after the U.S. slapped sanctions on the Iranian central bank, souring Korea’s relationship with Iran.

A Korean-flagged tanker and crew were detained in Iran in 2021 while passing the sensitive Strait of Hormuz. President Yoon Suk Yeol drew a strong protest from Tehran by saying that Iran was the enemy of the United Arab Emirates while visiting Korean troops based in the United Arab Emirates in January this year.

The return of the fund cannot fully normalize the bilateral ties between Korea and Iran, as it hinges on the relationship between Washington and Tehran. The U.S. won’t likely shift its policy on Iran. The waiver on sanctions was restricted to food, pharmaceuticals, and agricultural products.

Korea must act in tandem with the U.S. as an ally. But it must not neglect its ties with oil-rich Iran, either. The two countries have long maintained an amicable relationship, as seen in its naming of the road in a commercial district of Gangnam in Seoul as “Tehran Road” and vice versa in Tehran. Iran had been Korea’s major trade partner, with the amount of their commerce exceeding $12 billion until 2017. Korean companies endured major losses due to lengthy estrangement between the U.S. and Iran.

U.S. President Joe Biden may renew a negotiation with Iran on nuclear issues or seek a summit meeting to strengthen his position in the Middle East affairs ahead of the next presidential election in the U.S. Although ties cannot fully normalize in the near term, our Foreign Ministry must use the funding momentum to improve its relationship with Iran.