Gov’t faces U.S.-Iran conundrum - INSIDE JoongAng Daily

Gov’t faces U.S.-Iran conundrum - INSIDE JoongAng Daily

August 21, 2010

The Korean government will soon start talks with the United States and Iran over sanctions against the Middle Eastern nation, as Seoul finds itself torn between its obligation to its ally and its energy interests and large business contracts in Iran.

After a cabinet meeting at the Blue House, the government concluded there is a need for close talks with the two countries before participating in U.S.-led sanctions, a senior government official said yesterday.

“We’ve discussed a range of alternatives on how to approach the Iran issue and decided to talk to the U.S. and Iran in the near future,” he said.

The U.S. government announced late last week the Comprehensive Iran Sanctions Act, a list of disciplinary actions banning foreign multinationals from trading with Iran.

The government is considering sending delegations or formal letters to the U.S. and Iran. The timing of the moves, he said, hasn’t been decided.

He also said nothing has been decided over what kinds of sanctions Korea would apply to Iran. The Financial Supervisory Service (FSS) reviewed potential irregularities at the Seoul branch of Bank Mellat but the official tried to avoid speaking in detail about the level of sanctions Korea would accept.

An official at the FSS said the issue will likely be discussed in a regular meeting next month. Bank Mellat has reportedly traded with other Iranian banks and companies blacklisted by the U.S. government without getting an approval from the Bank of Korea, which is in violation of foreign exchange laws.

As to potential damage the sanctions could deal to local companies, the official said, “The damages are mostly related to financial transactions and we are in talks over how we can help them.”

Local exporters and oil importers are having trouble making banking transactions as local banks already stopped trades with Iranian banks. Korea relied on Iran for 9.5 percent of its annual oil consumption as of last year. Around 20 local companies exported $4 billion worth of goods to Iran last year.

“We will express our concerns while in talks with the U.S. and try to minimize damages to Korean companies,” the official said.

International sanctions are being strengthened against Iran. The Swiss government has frozen 1.5 million Swiss Franc ($1.4 million) in Iran-related accounts in Swiss banks.

By Limb Jae-un [jbiz91@joongang.co.kr]