EghtesadOnline: South Korea's finance minister has called for positive US consideration in resolving difficulties facing smaller South Korean companies due to US sanctions on Iran, the finance ministry said on Monday.
Hong Nam-ki, the minister of the economy and finance, made the request during his meeting with US Treasury Secretary Steven Mnuchin on the sidelines of an annual meeting of the Group of 20 finance ministers in Fukuoka, Japan, on Sunday, Yonhap News Agency reported.
Mnuchin said he hopes the issue can be resolved smoothly through close consultations between South Korea and the United States, the former’s Ministry of Economy and Finance said, without elaborating.
Last year, Washington imposed the most biting sanctions on Iran following the US unilateral exit from a 2015 nuclear agreement with Iran and five major world powers, according to Financial Tribune.
Last month, the US ended its sanctions waivers for South Korea, China, India and five other countries for Iranian oil imports, prompting Seoul to diversify its sources of oil imports.
Smaller South Korean exporters also face difficulties as they have stopped their exports to Iran due to the US sanctions on Iran, the ministry said.
The ministry declined to say how many South Korean companies are affected by the US sanctions.
Last week, Hong met with Iran's central bank governor, Abdolnaser Hemmati, in Seoul, and the two sides agreed to help address difficulties facing South Korean companies.
End of Won-Denominated Settlement Services
More than 2,100 South Korean companies can no longer sell goods to Iran after two Korean banks and the Central Bank of Iran halted won-denominated settlement services amid escalating US sanctions on Tehran, the Korea Times reported last month.
Since dollar-based trade between Iran and other countries was blocked in 2010, Korean firms have bypassed trade restrictions by using won-based services offered by Woori Bank and the Industrial Bank of Korea.
However, this may also be shut down after the US ended sanctions waivers.
The Korea Trade-Investment Promotion Agency said it had informed domestic exporting firms that financing for Korea-Iran trade based on won-denominated settlement services was no longer available.
In 2010, Woori Bank and IBK opened their won-based accounts at CBI so that Iranian buyers could pay Korean sellers by depositing rial into the central bank and Korean exporters could receive their payments by withdrawing won from Korean banks linked with CBI.
In return, Korean importers deposit won into Woori and IBK accounts at CBI when they import oil and other goods from Tehran.
The banks stopped services on May 2 just as the waivers ended the same day.
South Korea has been requesting the US to extend the waiver, but Washington said all countries will have to completely end Iranian oil imports.
Reportedly, the Korean government demanded the US allow the use of the won-denominated settlement service, saying it was separate from the oil waiver, but failed to win approval.
The banks said they have been informing companies about a potential freeze, thus the amount of receivables will not be substantial. However, industry officials said the freeze is expected to affect many small- and medium-sized manufacturers' future Iran-bound exports.
According to data from the Korea International Trade Association and the trade ministry, a total of 2,111 Korean firms exported goods worth $2.28 billion to Iran in 2018.
Of those goods, auto parts accounted for the most at $443 million as of October last year. These were followed by synthetic resin at $278 million and complete cars worth $83 million.
According to the Islamic Republic of Iran Customs Administration, Iran traded 5.64 million tons of non-oil commodities worth $4.61 billion with South Korea in the last Iranian year (ended March 20, 2019), registering a 51.05% and 43.03% decline in tonnage and value respectively compared with the year before.
Iran’s exports to South Korea stood at 4.91 million tons worth $2.56 billion, down 51.07% and 41.46% in tonnage and value respectively year-on-year.
South Korea was Iran’s fifth export destination during the year.
Iran mainly exported gas condensates, copper concentrates, chemicals and molybdenum oxide and hydroxide to South Korea during the 12-month period.
South Korea exported 735,116 tons of goods worth $2.04 billion to Iran, down 50.89% and 44.89% in tonnage and value respectively YOY. It was the seventh exporter of goods to Iran over the year.
The imports mainly included auto parts, vehicles, chemicals and refrigerator parts.