Iran Struggling to Pry Trapped Billions From South Korean Banks

South Korean banks wary of U.S. sanctions are holding tight to billions of dollars of Iranian funds, Iran says, apparently unwilling to budge before Joe Biden assumes the U.S. presidency.

The banks won’t release $7 billion of payments for Iranian oil that are stuck in won-denominated deposits in South Korea, not even to a special humanitarian trade channel partly overseen by the U.S. government itself, said the governor of the Central Bank of Iran, Abdolnaser Hemmati, who met with a top South Korean diplomat last week.

They’re showing “full cooperation” with the Trump administration’s “maximum pressure” campaign to isolate Iran from the global banking system through sanctions, Hemmati said on Monday in a written reply to questions sent by Bloomberg. He denied that the seizure of a South Korean-flagged tanker by Iran’s Islamic Revolutionary Guard Corps last month was related to the dispute over the funds.

The fate of the trapped money has taken on added urgency with Biden’s Jan. 20 assumption of power. The U.S. president-elect has said he’s open to removing sanctions and rejoining world powers’ nuclear deal with Iran if Tehran returns to full compliance with the accord Donald Trump quit in 2018.

Iran’s financial services sector and the central bank are sanctioned by the U.S. and the country is largely isolated from the global banking system even for trades that are meant to be exempt from sanctions, such as medicine and food.

The funds in South Korea could be transferred to the European Union-backed special trade vehicle known as Instex or a joint Swiss-U.S. mechanism if Korean banks would be willing to release the money, Hemmati said. But that would be a second step, he said.

“The first step is that we should witness a political will in Korean banks to release the funds and cooperate with Iranian banks,” he said. “We have not witnessed such a political will yet.”

Neither Instex nor the Swiss-U.S. mechanism has facilitated much trade with Iran because of the U.S. sanctions.

©2021 Bloomberg L.P.

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