Asia - Pacific

Iran, South Korea deal on blocked funds hits bumpy road

Seoul's remarks indicating need for consultations with US have not gone down well with Tehran

Syed Zafar Mehdi   | 25.02.2021
Iran, South Korea deal on blocked funds hits bumpy road


The tentative agreement Tehran and Seoul reached this week to unfreeze Iranian funds in South Korean banks is already facing hurdles, as the latter seeks the US’ nod and the former warns of legal action.

Sources told Anadolu Agency on Thursday that Iran has communicated in “strong words” that any further delay in releasing the frozen funds, amounting to over $7 billion, will imperil bilateral relations and force Tehran to take legal recourse.

It comes after a South Korean Foreign Ministry official said any decision on the Iranian assets will only be taken after consultations with Washington, a strategic ally of Seoul.

“The [South Korean official’s] remarks have, understandably, not been welcomed in Tehran and a clear message has been sent that Seoul dragging its feet on the matter due to US pressure will not be appreciated,” said a source, requesting not to be named due to the sensitivity of the matter.

In a meeting on Monday, Abdolnasser Hemmati, the head of the Central Bank of Iran (CBI), and Ryu Jeong-hyun, South Korea’s envoy to Tehran, reached an agreement to release part of the funds held in two Korean banks.

Details of the destination banks and the amount of transfer, starting with a payment of $1 billion in cash, were finalized by the two sides.

While welcoming Seoul’s “changed approach,” Hemmati did, however, clarify that Iran will be seeking damages caused by “lack of cooperation by Korean banks” over the years.

However, Seoul’s statement a day later that “the actual unfreezing of assets” will be done after consultations with the US has threatened to undo the progress made through bilateral diplomatic efforts.

“The resources belong to the Central Bank of Iran and the bank has the right to take legal action. Iran has suffered a lot in this regard,” Hemmati told reporters in Tehran on Wednesday in response to South Korea’s remarks.

It is clear that Tehran “will never agree” to a formula where the US has a “final say,” especially at a time when Tehran and Washington are locked in a stalemate over reviving the 2015 nuclear accord, a source told Anadolu Agency.

On Wednesday, Iran’s Foreign Minister Javad Zarif spoke to his South Korean counterpart Chung Eui-yong and stressed that Seoul must give the CBI access to its frozen funds “as soon as possible.”

He said relations between the two sides have been affected over the past few years owing to “illegal measures” by South Korean banks.

Meanwhile, according to Hemmati, Tehran has also started negotiations with other countries, including Japan, Iraq, and Oman, for the release of its frozen funds.

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