Iran’s Frozen Assets: The Case of South Korea

Iran’s Frozen Assets: The Case of South Korea
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In recent years among Iranian policymakers and economists, the issue of releasing Iran’s frozen assets to foreign banks has been one of the main topics of discussion. During this time, the Rouhani administration struggled to return the money back home through diplomatic means, in order to increase the government’s revenues and solve the economic problems that the country is facing. But with the continuing US sanctions, Iran’s efforts have not yet yielded significant results. In this regard, one of the most recent issues is visible with the ongoing bloackage of the Iranian assets in the South Korean banks. The Central Bank of Iran has won-denominated accounts at the Woori Bank and the Industrial Bank of Korea to receive payments for the import of the Iranian oil and pay for the export of goods to Iran that are not subject to sanctions. But after the lifting of the US sanctions exemption, these accounts were suspended and it has caused a split between Iran and South Korea.

On May 27, Abdolnasser Hemmati, head of the Central Bank of Iran, referring to Iran’s assets in the Korean banks and the lack of cooperation between these banks in the use of these resources, said that “the primary sources of these assets are completely clear, and there is no reason why Korean banks should block Iran’s use of their resources under the pretext of US sanctions”. Then he added, “the actions of Korean banks are preventing Iran from using its money to buy food and medicine, while this type of trade is not subject to US sanctions, and they (Korean banks) have decided to enter politics and follow the illegal and unilateral US sanctions”.  Without naming these Korean banks, he said that Iran could take legal action if the Korean side did not release the Iranian currency resources.

According to Hossein Tanhaee, Chairman of the Iran-South Korea Joint Chamber of Commerce, “the amount of Iran’s blocked assets in South Korea is between $ 6.5 billion and $ 9 billion, where South Korea was supposed to release $ 50 million, but they didn’t”. Moreover, he said that “South Korea not only doesn’t release Iranian currencies, but the Korean Woori Bank also wants Iran to pay for its maintenance, while Seoul is using and working with Iranian currencies”.

Although last year both countries reached an agreement about boosting economic relations, particularly on non-sanctions commodities, the current dispute about the frozen Iranian assets seem to contradict with the positive attitude between the two countries. Note also that Tehran and Seoul have also been negotiating banking operations for nearly two years to facilitate the trade for necessities including humanitarian products, medicine, medical equipment and also food items. In this regard, Hemmati visited South Korea in June 2019 and met with the Deputy Prime Minister and Minister of Economy and Finance of South Korea to develop trade and banking relations. As a result, Iran received medicine worth $ 500 thousand from South Korea. At the time of receiving this medicine package, the Iranian Foreign Ministry said the deal was confirmed by Washington. The Ministry also said that South Korea had $ 7 billion in oil debt to Iran, ahead of a time when the Trump administration re-imposed sanctions on Iran’s crude sales.

Hassan Rouhani, announced the lifting of the seizure of Iran’s assets in Luxembourg worth $ 1.6 billion and said that the assets would be returned back to Iran on March 14, 2020. However, as a result, these assets were not released, and based on a court decree, this amount remains in Luxembourg and will not be transferred to the United States. This money belongs to the Central Bank of Iran and has been confiscated since 2015 in Clearstream, Luxembourg. The Luxembourg court ruled that the decision of the American court to pay “compensation” to the survivors of the 9/11 attacks’ using confiscated Iranian assets is against international law. Some of the survivors of the September 11 attacks accused Iran of being involved in these attacks and sued the Islamic Republic in a New York court. Based on the complaints of the 9/11 attacks’ survivors, a federal judge in New York ruled in 2012 that the survivors could receive compensation from the blocked Iranian assets in Luxembourg, which is about $ 1.6 billion.

The total amount of Iran’s blocked assets in the international banks is unknown. In 2015, the Iranian frozen assets at the international banks were estimated at between $ 100 and $ 120 billion and nearly $ 1.973 billion of this amount were frozen in the US. While Iran’s blocked assets in European countries were estimated at $ 35 billion and in China up to $ 22 billion.  However, there are no official statistics on the sources which were released after the Joint Comprehensive Plan of Action (JCPOA) and the estimates are very different. The highest figure for resources released after the nuclear deal is $ 150 billion, mostly by some U.S. officials. But according to the Iranian officials, after the nuclear deal was implemented, approximately $ 59.7 billion of blocked assets were released from the UAE, UK, India, Greece, Italy, Norway, Japan, South Korea, and India. In particular, under the JCPOA, the US was to release $ 100 billion of the Iranian assets. However, the US closed this avenue by not releasing Iranian assets for legal and political reasons. The US claimed that the assets frozen in the US is not linked with the nuclear file but rather due to human rights violation in suppressing riots in 2009.

Apart from JCPOA, the International Court of Justice (ICJ) in February 2019 approved a bid by the Iranian government to return about $ 2 billion of the blocked assets in the US. The decision of the ICJ, which came after two-and-a-half years of proceedings, knocked back the US objections and paved the way for Iran to proceed with attempts to recover its assets. Iran has argued that keeping the assets frozen is illegal, because it violated the Treaty of Amity 1.

Overall, given the recent tensions between Iran and the US, the pressure on Iran has intensified and also the adverse effects of the sanctions and the coronavirus outbreak have reached a critical level. The economy of Iran has experienced even greater pressure since the eruption of the COVID-19 in the country in late February. Iran is facing a serious budget deficit and its GDP has fallen sharply. Also, the country’s foreign currency reserves have continuously depleted since the re-introduction of the US sanctions in 2018, when Washington withdrew from the JCPOA in 2015. Regarding the above issues and as the US continues to exert the “maximum pressure” campaign and does not intend to retreat soon, the release of the Iranian assets does not seem to be possible in the near future. 

 1 A friendship treaty signed between the two countries in 1955.