Iran and South Korea have agreed on a plan to release funds frozen in South Korean bank accounts and subject to U.S. economic penalties, despite President Biden’s refusal to ease sanctions on the regime prior to possible nuclear talks.
The situation has united some Republican and Democratic foreign policy experts who have served recent presidents. They are advising the new U.S. commander in chief to avoid giving Tehran a sense it can take control of other vessels in order to stuff its coffers with other frozen monies.
Iranian officials have been negotiating for the release of the funds, which reportedly total roughly $7 billion, over the last several weeks — although officials deny the talks were spurred by Iran’s seizure of a South Korean oil tanker in the Straits of Hormuz. Secretary of State Antony Blinken’s team has maintained that the Biden administration would not waive the sanctions renewed by the Trump administration when it withdrew from the 2015 Iran nuclear deal in 2018 — unless, that is, Tehran stops violating the accord.
“Our government has been in talks with Iran about ways to use the frozen assets, and the Iran side has expressed its consent to the proposals we have made,” the South Korean foreign ministry told local media. “The actual unfreezing of the assets will be carried out through consultations with related countries, including the United States.”
A top State Department official sidestepped when asked about the development.
“We don’t have a comment precisely on that, precisely because there has been no transfer of funds,” State Department spokesman Ned Price told reporters during a Tuesday briefing. “[South Korea is] very much a partner when it comes to sanctions enforcement across the board. … We do discuss these issues broadly, with the South Koreans, but I wouldn’t characterize it beyond that.”
International Monetary Fund officials estimated last fall that Tehran would end 2020 with just $8.8 billion “readily available and controlled” in currency reserves. Private sector estimates suggest that “South Korean banks hold between $6.5 [billion] and $9 billion in Iranian revenues from oil sales to Seoul,” making the agreement a potential boost in Tehran’s financial security.
“If you give Iran access to an additional $7 billion, that is a dramatic change in their economic, macroeconomic picture that is going to be dramatic for inflation for the currency for their import challenges,” said Foundation for Defense of Democracies senior adviser Richard Goldberg, a former Trump administration official who worked on Iran policy. “And this is now putting the Biden White House front and center in the hot seat of whether or not they are keeping their promises or breaking their promises very early.”
That concern is bipartisan, even if the South Koreans release only a fraction of that funding.
“If South Korea releases $1 billion from accounts frozen through sanctions to the Iranians for the release of their ship, we can expect more such seizures,” retired Ambassador Dennis Ross, who advised former President Barack Obama on Middle East issues from 2009 to 2011, wrote on Twitter. “It looks much like the way Iranians seize dual nationals to get something in return. This will strengthen the IRGC.”
South Korean officials are reportedly looking to release funds to Iran through a humanitarian aid channel brokered by Switzerland. Iran has long viewed the channel as a route to gain access to the funds, which are linked to entities that former President Donald Trump’s administration sanctioned for terrorism-related activities, but fear of running afoul of U.S. sanctions deterred South Korean banks from conducting the transactions.
“While food and medicine transactions are permitted, there is a fear that the regime would be manipulating those transactions because of its past track record of inventing companies claiming humanitarian transactions and in fact being fronts for the IRGC,” Goldberg said.