Iran eyes release of $1bn in frozen funds from Korea

Iran said today that it hopes South Korea will release about $1bn of its funds frozen because of US sanctions, following a meeting between officials from both countries earlier this week. But Seoul tempered expectations by saying any movement of those funds would first need to be cleared with Washington.

Iran's Central Bank yesterday said that an "agreement" had been reached with South Korea to both transfer and use part of the Central Bank of Iran's financial resources.

"The governor of the central bank Abdolnaser Hemmati gave promising reports about the meetings and discussions held with Korean and Japanese representatives about the use of the central bank's resources that have been blocked in these countries," government spokesman Ali Rabiei said.

"The governor said that around $1bn of these funds would be released to us in a first step," Rabiei said, adding that Iran was already in discussions with other countries like Iraq and Oman about using the funds "to help meet the country's fundamental needs like basic goods, agricultural goods, medicines and medical equipment." Iran has been battling with the Mideast Gulf's worst and most deadly Covid-19 outbreak, with more than 1.59mn people infected and nearly 60,000 people dead.

But, comments from Seoul shortly after suggested that there is still some way to go before the funds could be released.

"During the meeting… the two sides inched closed on their opinions and the Iranian side expressed consent to the proposals we have made," South Korean foreign ministry spokesman Choi Young-Sam said.

Separately, the ministry said: "The actual unfreezing of the assets will be carried out through consultations with related countries, including the US."

These comments represent the latest chapter in a more-than-year-long dispute between the two countries over around $7bn in revenues that Iran says it is owed by South Korea for past crude sales. The funds have sat frozen in two Korean banks since Seoul stopped all purchases of Iranian oil in 2019, ahead of the expiry of waivers on US sanctions against Iran. Before that, South Korea was one of the biggest buyers of Iranian crude and condensate, importing around 280,000 b/d in the January-April 2019 period.

Iran has called on South Korea to release the funds since last year, but to no avail.

The dispute escalated last month after Iran's Islamic Revolutionary Guard (IRGC) navy seized a South Korean-flagged chemical tanker, the Hankuk Chemi, as it made its way from Jubail in Saudi Arabia to the UAE's port of Fujairah. Iran said at the time that it detained the tanker because it was causing "environmental pollution" in the Mideast Gulf, and denied that it had any link to the funds Iran was trying to repatriate. The tanker remains in Iranian custody while Iran's judiciary continues its investigation.