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First Vice Minister of Foreign Affairs Choi Jong-kun attends a roundtable discussion with Central Bank of Iran Governor Abdolnaser Hemmati and others in Tehran on Jan. 11. (provided by the Ministry of Foreign Affairs)

South Korea and Iran have agreed on a plan to pay part of Iran’s dues to the UN using US$7 billion in funds that are currently frozen in South Korea. But the Iranian government strangely overstated the importance of this plan, without mentioning the need to clear it with the US.

Choi Young-sam, spokesperson of South Korea’s Ministry of Foreign Affairs (MOFA), addressed the outcome of South Korea-Iran deliberations about the frozen funds during a the daily press briefing on Feb. 23.

“In a meeting on Feb. 22, South Korean Ambassador to Iran Ryu Jeong-hyun and the governor of the Central Bank of Iran came to a basic understanding, with Iran agreeing to the plan we had proposed. But before the frozen funds are actually released, the plan needs to be discussed with the international community, including related countries [the US],” Choi said.

The news was first announced on the website of the Iranian government on Feb. 22. Tehran said that Central Bank of Iran Governor Abdolnaser Hemmati and South Korean Ambassador Ryu Jeong-hyun had agreed on a way to transfer and use the funds frozen in South Korea during a meeting the day before.

Iran quoted Ryu as saying that South Korea was prepared to take every measure necessary for Iran to use all its funds in South Korea and that those funds were not under any restrictions or constraints.

After Iran made this announcement late in the evening of Feb. 22, there was speculation about whether the two countries had reached a final agreement on how to deal with Iran’s frozen funds. That interpretation was reinforced by the remarks that Iran attributed to Ryu, the South Korean ambassador.

After the Donald Trump administration in the US withdrew from the Joint Comprehensive Plan of Action — commonly known as the Iran nuclear deal — in 2018, it reimposed economic sanctions on Iran. That led to US$7 billion of Iranian funds being frozen in two South Korean banks.

According to multiple explanations provided by MOFA on Feb. 23, the two countries had agreed to the specific procedures for using part of Iran’s frozen funds. MOFA officials said they had reached an understanding about specifying the amount of money to be transferred and the route of its transfer to gain the consent of the US Treasury Department.

Under this plan, South Korea would pay part of Iran’s frozen funds (US$16.25 million) as Iran’s membership dues to the UN. That’s the minimum contribution that Iran must make to regain its voting rights in the UN General Assembly.

In early February, MOFA said that it had concluded deliberations with the US about using the frozen funds to pay Iran’s UN dues and that only some very technical matters remained to be discussed.

“I understand that we’ve discussed this matter with a bank in the US. The bank is apparently reviewing related matters [including the remittance process],” a South Korean government official said.

In addition to paying UN dues, South Korea and Iran also reportedly agreed on the details of transferring part of the frozen funds through a channel called the Swiss Humanitarian Trade Arrangement.

“Basically, we suggested something the Iranians hadn’t thought of, and they agreed to the idea,” a MOFA official explained.

The Swiss channel was created in February 2020 as a way to export humanitarian supplies to Iran with the approval of the Trump administration. Under this plan, humanitarian goods, such as pharmaceuticals and food, are bought in Switzerland and exported to Iran, with the payment guaranteed by Swiss banks. Until now, the Iranian government had held a negative view of that channel.

“Deliberations with the US are needed, but we’re thinking of [transferring] quite a large amount through the Swiss channel. The amount is satisfactory to the Iranians,” a MOFA official said.

MOFA seemed taken aback by Iran’s exaggeration of the progress made in the two countries’ deliberations. In its announcement, Iran failed to mention the need for deliberations with the US, a critical procedural step in transferring the frozen funds.

“Iran is only saying what it hopes will happen. South Korea and Iran may have come to an understanding, but it can’t go ahead without US consent. That can’t be called an agreement, and it probably won’t work out,” a South Korean government official said.

Some think that Iran wanted to underscore the issue of the frozen funds during its tug-of-war with the US over returning to the Iran nuclear deal. Another possibility is that Iranian President Hassan Rouhani, who is seen as a moderate, is trying to highlight his achievements before the upcoming presidential election in June.

By Kim Ji-eun, director staff reporter

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