September 09, 2010 13:29
Seoul on Wednesday announced a set of sanctions against Iran that will require South Korean companies to seek prior approval for financial dealings with 102 organizations and 24 individuals, including the Iranian Revolutionary Guard Corps, the state-run shipping company, and all 15 of the country's banks. Some Iranians are also banned from entering Korea.
The government suspended the Seoul branch of Iran's Bank Mellat for violating foreign exchange transactions regulations after U.S. allegations that the bank was involved in the trade of weapons of mass destruction. In general, South Korean businesses dealing with Iranian firms will need prior approval for any financial transaction over 40,000 euros and report deals over 10,000 euros. Crude oil imports from Iran are not among the sanctions' targets.
The sanctions follow UN Security Council Resolution 1929 of June this year aimed at blocking Iran's nuclear weapons program, and their scope is similar to those adopted by the EU, Australia, Canada and Japan.
Seoul had to do some grappling with the sanctions. On the one hand it needed to show its willingness to live up to its responsibilities in the alliance with Washington, to cooperate in international efforts to block Iran's nuclear weapons ambitions, and to send a clear message to North Korea over its nuclear armament. But on the other hand Seoul had to minimize the impact on its US$10 billion trade with Iran. The most important question was how to deal with Bank Mellat, which has overseas branches in only two other countries, Turkey and Armenia. The U.S. wanted South Korea to shut down the Seoul branch and freeze its assets because it believes the branch has served as an Asian conduit for money to fund its nuclear program. Tehran in turn warned Seoul it would retaliate.
The sanctions therefore represent a compromise. The key now is how the U.S. and Iran will react. In the worst-case scenario, both would be miffed. This makes it crucial for South Korea to take diplomatic follow-up steps so that both the U.S., which is spearheading sanctions, and Iran, which is their target, realize that this was the best decision under difficult circumstances. Seoul needs to take careful steps to minimize Iranian anger and look for ways to ensure that the sanctions will not hurt relations in the long term.
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