Iran Pushes South Korea to Release Trapped Billions: Q&A
The head of Iran’s central bank, Abdolnaser Hemmati, provided written answers to questions from Bloomberg about the Islamic Republic’s ongoing dispute with South Korea over billions of dollars in oil revenue that is trapped in banks there and Tehran wants to tackle the coronavirus.
Iran recently received $500,000 of medicine from South Korea, after two years of negotiations. Why did it take so long and why is the shipment relatively small?
We have substantial amount of funds, billions of dollars in fact, in Korean banks, these are our funds, it is our prerogative to use these funds to import whatever we deem needed for our people. However, given the U.S.’s illegitimate and illegal unilateral sanctions on our trade and financial transactions, we face difficulty utilizing our funds abroad. It is a shame that our long-time trading partners fall to U.S.’s traps and create hurdles for further cooperation. Let me put it bluntly, would you put your hard-earned money in a bank and then negotiate with the bank to let you spend it? This is bad business.
How much money does South Korea owe Iran, for unpaid oil shipments?
South Korean importers don’t owe us anything, we have received our export proceeds in our accounts in Korean banks, the issue is the unjustified blockage of our funds in Korean banks that we want to be used for our imports, mainly for foodstuffs and medicine.
Why is Iran not able to access this money? To what extent are you discussing this issue with the government of South Korea?
First, let me clarify a key point here. The United States unilaterally pulled out from the nuclear deal and this, by itself, utterly was a violation of international agreements. The U.S. wished to put pressure, economically and politically, and crush Iran. This never happened and the gamble did not pay off. The “maximum pressure campaign”, as they call it, did not achieve Americans’ ill-fated goal, and although it had put hurdles on our economic growth, it did not derail our economy as they dreamed. We have built our own trade channels, with our partners in Europe, Asia and the rest of the world.
South Korea has been our reliable partner, we have worked with Koreans’ in heavy machineries, the autos sector, and electronics, in return, we have exported goods, mostly oil and natural gas condensate to Korean markets. Our exports picked up after the nuclear deal, and our exporters managed to accumulate considerable funds in Korean banks. At that time, not only were there no sanctions on our exports, but on the contrary, all parties were encouraged to expand their businesses with Iran. All these funds that we have in Korean banks, are either the proceeds of that time, well before the U.S. withdrawal from the JCPOA (Joint Comprehensive Plan of Action) agreement, or are the results of various U.S. waivers on our exports since then.
Mr. Hong Nam-ki, deputy prime minister and minister of economy and finance, personally assured me that he will help resolve the issue when I met him last year in Seoul, however, we have yet to see any progress on his promise. We of course, continue our dialog with Korean authorities.
As I noted, we intend to use our funds in Korean banks to buy foodstuffs and pharmaceuticals, which are clearly not subject to unilateral U.S. sanctions. The Korean authorities and the banks must honor their obligations to us. In fact, I foresee that if they don’t, and continue to play politics, other countries and international businesses will evaluate their trade, banking, and financial relations with Korean banks and financial institutions as they seem captive to U.S. politics. In any event, should Korean banks not adhere to their international agreements with us, we reserve our rights to take legal actions under international laws, and obviously we see the South Korean authorities responsible in the process.
Is there a plan to establish a trade vehicle, similar to the EU’s Instex, with Seoul so that Iran can import more goods from South Korea in lieu of oil payments?
The Korean authorities have communicated that they are seeking to propose such a vehicle, though it seems that they have stonewalled with the Americans. Apparently, they are trying to make sure that the U.S. Treasury approves such a scheme.
Will Iran be able to import other goods, other than humanitarian ones, from South Korea instead of the money it owes?
We, with no doubt, are seeking to access our own funds in Korean banks for all sorts of imports, however, given the situation that has been created by the U.S. sanctions and the reluctance of Korean banks to fulfill our legitimate demands, we have agreed to work with them in using these funds only for humanitarian needs.
To what extent are U.S. sanctions and U.S. policies toward Iran affecting this issue? Iran’s Foreign Ministry has said that Korea has blocked Iran’s access to this money because of pressure from the U.S. government, can you elaborate on this?
Let’s be clear here. We have worked with our Korean partners, including financial institutions, in good faith, so in return they honor their obligations. It is appalling to see that Korean banks have conveniently neglected their obligations, common international financial agreements, and decided to play politics and follow illegal-unilateral U.S. sanctions. Besides, we are not even asking for anything remotely in conflict with U.S. sanctions. We are simply asking Korean banks, to let us use our money and import humanitarian goods, including foodstuffs, medicine, and medical equipment. These items are already exempt from U.S. sanctions. This is not too much to ask. I have difficulty understanding the hesitation by Korean banks, unless, they are playing games and using Iran’s money to boost their own reserves, I hope I am wrong here.
How optimistic are you that Iran’s economy can survive the impact of the coronavirus outbreak?
We are weathering the crisis well; the economy is getting back to track and we see signs of solid economic activity. I am confident that, while the human cost of the outbreak remains devastating, we will manage the economic fallouts.
What are your forecasts for Iran’s economic growth in the year ahead? How big will the economic contraction be?
I am not sure we will see the same order of negative impacts that European countries and the U.S. are experiencing. I think we will see moderate growth this year. Recall that we were one of the first countries hit by the virus, but thanks to our incredible heroes in the front line against this virus, we will manage the economy well.
You’ve said before that non-oil exports are going to be a major part of Iran’s economic recovery, to what extent can these exports offset revenue lost from oil sales?
The main driver of our economy is the non-oil sector. Although the government budget was tilted more toward the oil revenue in the past, we have taken corrective actions to remedy this once and for all.
What are your predictions for Iran’s non-oil exports? How much do you expect them to go down or up in value over the next six months?
Despite negligible decline in our non-oil exports and exchange of currency in the first two months of coronavirus epidemic, we gradually managed the situation. The process of non-oil exports goes on well and we predict that little by little it resumes to its initial position and even will be better than before.
Are you hopeful that U.S. sanctions may be lifted in the months ahead? Considering President Donald Trump’s recent tweet and given the internal crisis in the U.S., do you think there is an opportunity for Iran to secure a favorable agreement with the U.S.?
We don’t run our economy by tweets, nor do we base our plans on wishful thinking of some. It is unfortunate that the Trump administration has taken the approach of “maximum pressure” against the people of Iran. This has been a huge error in judgment on the U.S. part. We will continue our efforts to navigate our economy, maintain economic stability, and help our people to prosper. Our long history is a testament that Iran thrives under pressure, we become stronger, united, and more resilient.
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