Iran accuses South Korea of holding $7bn Iran funds 'hostage'

An Iranian government spokesman on Tuesday rejected allegations that Iran’s seizure of a South Korean vessel amounted to hostage-taking, and said was it was South Korea that was holding $7bn of Iran’s funds “hostage”.

“We’ve become used to such allegations ... but if there is any hostage-taking, it is Korea’s government that is holding $7bn which belongs to us hostage on baseless grounds,” spokesman Ali Rabiei told reporters at a news conference streamed live online.

We remind that on Monday Iran’s elite Revolutionary Guards seized a South Korean oil tanker in the Strait of Hormuz with five nationals aboard for alleged environmental violations. Shortly after that Seoul lodged a formal protest with Iran, calling for the immediate release of the people and Saeed Badamchi Shabestari, the Iranian ambassador to South Korea, was called into the foreign ministry in Seoul on Tuesday.

The tanker seizure has highlighted the simmering dispute between South Korea and Iran over $7bn in Iranian cash held by South Korean banks.

As FT writes, South Korea, home to a massive refining industry, is the world’s fifth-largest oil importer. Before the latest US-led efforts to restrict Iranian oil revenues, Tehran’s suppliers accounted for almost 15% of Seoul’s oil imports.

According to a commerce ministry official in Seoul, after the US restricted the use of dollars for transactions with Iran, Tehran’s central bank created new accounts with South Korean commercial banks to facilitate trade in Korean won.

"Those accounts were frozen after the Trump administration tightened sanctions on Iranian oil exports in 2019," the official said.

As a result, accounts with Woori Bank and Industrial Bank of Korea hold some of the $7bn in frozen Iranian funds, the banks told the Financial Times. They did not provide exact figures.

Furthermore, Iran last month complained it had been unable to transfer €180m out of South Korea to buy vaccines, despite the worsening crisis in the country wrought by the pandemic. An IBK spokesman said that the bank believed the money could be released for humanitarian purposes but such a move required approval from the US Treasury.

“There is nothing an individual bank like us can do about it,” the spokesperson said. South Korea’s foreign ministry declined to answer questions about the frozen funds.

Similar articles