[Reporter’s notebook] Can S. Korea turn crisis into opportunity with the frozen payments it owes to Iran?

Posted on : 2021-01-24 09:38 KST Modified on : 2021-01-24 09:38 KST
The tanker fiasco and frozen payments both trace back to the Trump administration
South Korean First Voice Foreign Minister Choi Jong-kun returns to South Korea after a trip to Iran on Jan. 14. (Yonhap News)
South Korean First Voice Foreign Minister Choi Jong-kun returns to South Korea after a trip to Iran on Jan. 14. (Yonhap News)

On Jan. 14, South Korean First Voice Foreign Minister Choi Jong-kun returned from a visit to Iran without any noticeable progress in negotiations for the release of the crew of a Korean-flagged oil tanker seized by Iran.

“They [the Koreans] needed a slap in the face [. . .] so they realize that they cannot block Iran’s money when we are desperate to buy medicine and vaccines,” said an Iranian government official quoted by the Financial Times on Jan. 10.

The Korean government can’t be blamed for not applying its diplomatic resources, nor is the problem found in Korea and Iran’s bilateral relationship. The root cause lies with the US, and more specifically with the Trump administration’s unilateral withdrawal from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), in May 2018.

The US’ reimposition of sanctions on Iran following that withdrawal trapped US$7 billion of Iranian money in Korea, and those funds are what the current incident is all about.

The Korean government wants to return those funds to Iran, but the Trump administration’s actions leave it with no choice.

But right now, the Iranians are very upset with Korea. They think that the Koreans are too concerned with what the Americans would think.

It’s estimated that American sanctions have tied up US$100-120 billion in Iranian funds around the world. The US$7 billion in Korea is the biggest chunk of that.

Under the Obama administration, Korea received sanction waivers, just like China and India, and imported a large amount of Iranian petroleum and natural gas. Trade between Korea and Iran grew along the way. Then the sudden reimposition of sanctions by the Trump administration left a lot of Iranian money trapped in Korea.

The Iranians are angry that Korea hasn’t made much of an effort since then to return Iran’s money. That timeframe largely overlaps with Trump’s unexpected decision to open summit diplomacy with North Korea.

South Korea effectively dedicated all its diplomatic resources to pushing for the normalization of North Korea-US relations, in a bid to resolve the North Korean nuclear issue. Seoul acquiesced too easily to Trump’s plan to hold talks with North Korea while taking a hard line on Iran.

The fact is that Iran hasn’t picked fights with other countries that are holding its money. South Korea is the only one it has complained about, a tendency that has been covered by the Korean press.

Soon after the US reimposed sanctions, China and India reportedly found various ways to mollify the Iranians.

“Even China has been giving Iran cash to survive, but Koreans [acted] as if they did not care at all which made Iran furious,” one analyst told the Financial Times.

“We have had funds in other countries as well and we have had access to and used them despite US sanctions,” said Abdolnasser Hemmati, governor of the Central Bank of Iran, who complained about Korean apathy in an interview with Al Jazeera.

US$5 billion of Iranian money is also tied up in Iraq, but Iraq has reportedly agreed to let Iran use some of that money to purchase COVID-19 vaccines.

Korea has also said it has received a sanctions waiver from the US for Iran to use its frozen funds to purchase vaccines from COVAX, short for the COVID-19 Vaccines Global Access Facility. Korea has also used a small portion of the money to have pharmaceuticals and medical equipment sent to Iran.

But Iran claims that any money Korea remits through JP Morgan to be used to buy vaccines would be seized by the US while en route.

Iran has also reportedly suggested using the barter approach, in which Korea would make proxy purchases of vaccines and other medications and have them sent to Iran. Iran has insisted that at least US$1 billion be used toward that end.

Another issue that came up during Choi’s visit to Iran was the idea of South Korea purchasing ambulances on behalf of Iran. Iran rejected the idea, claiming that Korea had proposed it, but Korea made the counterclaim that the idea had originated with Iran.

Fundamentally, the disagreement is based on the fact that Iran is making extreme demands. In reality, Iran wants to use this dispute to test the US. It’s a classic tactic of misdirection: harassing South Korea in a covert attempt to provoke the US.

Without the US’ understanding and consent, the situation appears basically impossible for Korea to solve.

While this is unfair for Korea, it could actually be a blessing in disguise. Korea and Iran’s inability to find a solution to the Iranian funds is basically due to the Trump administration.

No solution has been available under the Trump administration, but Biden will soon be inaugurated. A top foreign policy priority for the Biden administration is reinstating the Iranian nuclear deal.

Until the US makes a move, the Iranian funds in Korea will remain frozen. Therefore, American action, or lack of action, could serve as a bellwether for efforts to restore the Iranian nuclear deal.

Biden has said that the Iranian nuclear deal — which he means to reinstate as soon as he enters office — is a blueprint for the North Korean nuclear negotiations.

Korea needs to guide the incoming Biden administration toward resolving the issue of the Iranian funds. Biden and his advisors are surely well aware that doing so would be the first step toward restoring the Iranian nuclear deal.

“Both Korea and Iran need to get this issue ready for Biden to tackle once he’s in office, and, in fact, they already seem to be doing that,” said a source in Korea’s ruling party.

“I believe that the Iranian government will take quick action on the ship and its crew. Korea and Iran took a big step together,” said Choi upon his return to Korea.

A more disturbing question is whether the Korean diplomatic establishment can overcome its bad habits. Korean diplomats have a nasty tendency to grovel before the strong and disregard the weak.

Korea needs to tackle this issue with a more proactive, and sacrificial, attitude. We need to be willing to get our hands dirty to find a solution. We should bear in mind that this is the first step toward resolving the North Korean nuclear issue in the Biden era.

Jung E-gil
Jung E-gil

By Jung E-gil, senior staff writer

Please direct comments or questions to [english@hani.co.kr]

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Related stories

Most viewed articles