By Jack Kim
Iran is the fourth-largest source of crude for South Korea, and disruption of shipments would have a big impact on Asia’s fourth-largest economy that relies on imports for all its energy resources.
“There could be detrimental damage to our economy. That’s the situation we’re in,” a senior government official, who ask not to be identified, said on Friday.
South Korea is the world’s fifth-largest buyer of crude, and about 10 percent of its supplies come from Iran.
“The government is in a very difficult situation,” the source said. “It is time to pursue a very careful approach between having to join an international effort and trying to minimise the impact on our trade ties with Iran.”
The United States declared Iran the biggest state sponsor of terrorism this week, ratcheting up pressure on its long-time foe even as President Barack Obama signalled he remained open to talking to Tehran about its nuclear programme.
South Korea, growing faster than expected in the second quarter and outpacing regional peers as it recovers from the global financial crisis, is now focusing on boosting business conditions for small and medium sized firms. Many of them look to Iran as a crucial export market.
Billions of dollars are also at stake in Iranian contracts for South Korea’s construction firms and shipbuilders.
Iran is a $4 billion market for South Korea’s automobiles, home appliances and other consumer goods, and as many as 2,000 South Korean manufacturers have business links with the country.
Since June, the U.N. Security Council, the United States and the European Union have tightened sanctions on Iran over its refusal to enter into international talks on its nuclear programme, which Washington fears is a cover to build an atomic bomb, but which Tehran says is for the generation of electricity.
The Obama administration believes there are some small signs that the tougher sanctions are beginning to have an effect, a senior administration official told Reuters, although he acknowledged that it was hard to quantify.
Obama’s arms control envoy urged Seoul to join efforts to pressure Tehran during a visit this week that also focused on formulating fresh financial sanctions on North Korea.
South Korea is locked in a protracted attempt to get North Korea to abandon its nuclear arms programme, for which it needs its ally Washington to add pressure on Pyongyang with sanctions implemented through the international financial network. (Additional reporting by Lee Shin-hyung; Editing by Jeremy Laurence)
