CBI Disparages Currency Friction With South Korea

EghtesadOnline: Governor of the Central Bank of Iran Abdolnasser Hemmati says the bank’s foreign exchange policy has been crafted without taking into account billions of assets blocked overseas.

News ID: ۷۸۶۲۴۷

13 March 2021

He was responding to a statement by the US Secretary of State Antony Blinken earlier in the week who said the White House would keep controlling Iranian funds frozen in South Korea unless Tehran returns to the 2015 nuclear accord.

The deal was abandoned by the former divisive president Donald Trump in 2018. In response, Iran scaled down its commitments envisioned in the historic accord with the six world powers.

"The central bank has centered its plan of meeting the country's forex needs irrespective of the assets locked in South Korea or other countries," Hemmati wrote in a note posted on his social media account on Thursday.

Tehran has been pressuring Seoul to unblock more than $7 billion of its assets frozen in two Korean banks due to the unprecedented US economic blockade. Seoul has said it is in talks with Washington on ways to release the money without violating the sanctions.

In mid-February, the senior banker said Iran and South Korea had reached an agreement on using "part" of Iran’s forex assets held in the Asian country.

Soon after, the foreign ministry in Seoul said the Iranian assets would be released after consultations with the US.

Later that month, anonymous foreign ministry officials told Korean news outlets that Washington had agreed in principle on the partial transfer of Iranian funds held by Korean banks to Switzerland, from where it could be sent back to Iran via the Swiss Humanitarian Trade Arrangement (SHTA).

The government spokesman in Tehran Ali Rabiei then confirmed that Iran was supposed to receive at least $1 billion of its frozen assets in the first step.

Blinken dismissed reports that the Korean government had unblocked any such funds and the US hasn’t authorized that.

“The report is incorrect,” Blinken said Wednesday in response to a question from Representative Greg Steube, a Florida Republican. “Unless and until Iran comes back into compliance, they won’t be getting that relief, and the report that you’re referring to is simply incorrect,” Bloomberg quoted him as saying.

Lacking Resolve

In his note Hemmati said Korea lacks political will independent of the US. "It was crystal clear in the first place that the South Korean government lacks an independent will to settle the issue of Iran's currency resources," he wrote.

Blinken's statements were criticized by Foreign Minister Mohammad Javad Zarif, who accused the US under Joe Biden of following Trump's "failed policy" toward Iran.

"The US claims that it favors diplomacy, not Trump's failed policy of maximum pressure. Yet @SecBlinken boasts about blocking Korea from transferring our OWN money to the Swiss channel - only used for food and medicines," he wrote in a twitter post on Thursday. "Repeating the same policy won't yield new results," he added

Defying Seoul’s inability and passivity to release Iran’s funds, Hemmati retreated that the central bank continues to "smoothly" secure currency needs for importing basic goods, medicine and raw material with the help of currency earnings from non-oil export.

The CBI has allocated $10 billion in subsidized currency since the beginning of the current fiscal year (ends March 20) to import basic goods, medicine and agriculture inputs, Hemmati said.

The CBI allots subsidized currency for importing basic needs where the dollar is worth 42,000 rials -- almost a fifth of its real value. Hemmati said non-oil exporters have returned proceeds worth $24 billion in the outgoing year. "More than $3.3 billion was made available through Nima since Jan.20 alone," he wrote, referring to a CBI-affiliate forex trade platform where exporters sell their overseas forex earnings to importers.