Woori, Industrial Bank of Korea freeze accounts with Bank Tejarat


The new sanctions halting Korea’s transactions with the third-largest Iranian financial entity Bank Tejarat will not constrict trade flows with the Middle Eastern country, bank officials said Wednesday.

Two state-run banks ― Woori Bank and the Industrial Bank of Korea ― halted transactions with Bank Tejarat as of Jan. 23 in support of the U.S.-led sanctions against Tehran aimed at preventing the country from developing nuclear weapons.

The extended sanctions are unlikely to slow trade flows with Iran as most Korean exporters can still make settlements with Iran’s central bank at the won-denominated accounts of Woori and IBK, Jeon Gwang-wook, head of foreign exchange desk at IBK said.

“We halted wire transfers of cash to accounts of Bank Tejarat, but this doesn’t hurt exporters at all. Most of exporters take payments from the Central Bank of Iran anyway,” Jeon said.

The Finance Ministry is encouraging local exporters to organize other means to settle transactions as Woori Bank and IBK stopped offering credit and wire transfers of cash to Bank Tejarat.

The international sanctions are pushing Iranian financial companies to rely more on illiquid currencies but are unlikely to stop local companies trading with Tehran, Park Ki-yong, an oil industry analyst with expertise in Middle Eastern countries at Korea Investment & Securities said.

“Transactions with Iranian entities have never been made impossible due to sanctions. Exporters always found a route, often through a third country like Japan, to settle payments for their goods sold,” Park said.

“It’s likely to proceed that way this time around,” he added.

An Iranian government official, who declined to be named, said he would talk to Korea’s Foreign Ministry to see if the extended sanctions can be reconsidered.

The U.S. has been demanding Seoul end trade activities with Iran, putting at risk over $7 billion in annual exports and about 10 percent of its crude imports. Seoul is currently seeking resources to replace over 80 million barrels of crude a year.

President Lee Myung-bak met with Saudi Arabia’s Oil Minister Ali al-Naimi on Tuesday to request a stable crude supply to South Korea in the event of an emergency. Naimi responded that he would consider increasing supply to Korea to help stabilize prices, the presidential office said.

By Cynthia J. Kim (cynthiak@heraldcorp.com)