[THE INVESTOR] South Korea is planning to launch a euro-based payment system for companies doing business with Iran.

This is after the US government gave its nod of approval to the move in June during a Korea-US finance ministers meeting.

The Seoul government is now in the process of selecting a bank to manage the new system. The two candidates are the Industrial Bank of Korea and Woori Bank.

Partner banks in Europe will also be selected following further talks with Washington. 

Euro is the currency that the Iranian government and companies prefer, but the South Korean currency won must first be converted into dollars, meaning the new payment system requires the cooperation of Washington.

Trade with Iran has been widening, especially following President Park Geun-hye’s visit to the Islamic republic in May.

Park came home with corporate memoranda of understanding worth US$45.6 billion, but the problem is the lack of channels for handling the financial transactions.

South Korean firms are currently obligated to make all monetary transactions via their Korean currency accounts at the Iran Central Bank.

South Korean firms have been requesting Seoul to open a euro-based payment system for a while, but the government has been unable to strike a deal due to limitations posed by US local laws.

Earlier this year, the international community lifted its sanctions on Iran, which had been penalized for its uranium enrichment program.

By Kim Ji-hyun (jemmie@heraldcorp.com)