Iran Economy NewsSouth Korea to close Iranian bank branch

South Korea to close Iranian bank branch

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Wall Street Journal: South Korea will move to temporarily close the local branch of an Iranian bank as part of its effort to join United Nations sanctions over Iran’s nuclear program, according to people familiar with the matter.

The Wall Street Journal

By EVAN RAMSTAD

SEOUL — South Korea will move to temporarily close the local branch of an Iranian bank as part of its effort to join United Nations sanctions over Iran’s nuclear program, according to people familiar with the matter.

But the move will likely disappoint U.S. officials, who praised stronger measures implemented by the European Union and Japan, because Seoul doesn’t appear ready to further sever business ties. South Korea’s reluctance to move more dramatically indicates how tough it can be for countries to put sanctions in place on resource-rich Iran.

A task force led by South Korea’s Finance Ministry has been working for more than a month to develop the penalties under U.N. resolution 1929 and is scheduled to formally announce them on Wednesday. According to people familiar with the plans, a two-month suspension of the South Korean branch of Iran’s Bank Mellat will be the centerpiece of the South Korean penalties.

An executive at the Bank Mellat office in Seoul declined comment Tuesday on word of the expected temporary closing. The branch has assets of about $3 billion.

But Seoul is unlikely to cut oil imports or curtail business activities by South Korean companies in Iran. Iran is South Korea’s fourth-largest supplier of oil, and South Korean construction firms have sizable projects there. Without such moves, South Korea’s sanctions will likely be less sweeping or have less impact than those imposed by Japan, the EU and other countries that have halted investments in Iran and tightened financial transactions with the country.

The U.S. has been pressing many countries, including South Korea, to implement the U.N. sanctions and clamp down on a number of Iranian entities that are suspected of nuclear proliferation activities.

Bank Mellat, Iran’s second-largest bank by assets, has been a special target in South Korea. South Korea and Turkey are the only countries in which the bank operates an overseas branch. U.S. officials reportedly asked South Korea to close the branch.

A month ago, the U.S. officials in charge of nuclear-related sanctions against Iran and North Korea visited Seoul to urge South Korean officials to press Tehran as they have neighboring Pyongyang.

Since then, Iranian diplomats have been on a public-relations campaign to urge the South Korean government and public not to go along with the U.N. sanctions. Iran’s ambassador to South Korea has appeared in numerous newspaper and TV interviews warning that South Korean businesses in Iran might be replaced by those from other countries if Seoul adopts sanctions.

Two-way trade between South Korea and Iran was about $10 billion last year, with Iran holding a $2 billion surplus in the relationship. By comparison, South Korea’s two-way trade with the U.S. was $68 billion last year, with South Korea holding a $10 billion surplus in the relationship.

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