The story: Iran is preparing to take legal action against the South Korean government over the freezing of Iranian assets by two Korean banks. For years, Tehran has been unable to access the funds—estimated at some 7B USD—due to US extraterritorial sanctions.
Meanwhile, reports say a potential Iran-US prisoner swap has hit a snag over the detention of another American citizen. The exchange is tied to South Korea in that the unfreezing of Iranian assets is likely an essential part of any bargain between Tehran and Washington.
The coverage: The official IRNA news agency reported on July 29 that the government had submitted a bill to the parliament allowing the Central Bank of Iran to seek arbitration to resolve the dispute with the South Korean government.
- IRNA said the bill was approved by the Ebrahim Raisi administration on July 5 and submitted to the legislature on July 22.
- Mohammad Dehqan, Raisi’s deputy for legal affairs, stated that the government would “not hesitate” to take legal action but added that “the path of political negotiations…is open.”
Iranian Foreign Ministry spokesman Nasser Kanani told reporters on July 31 that “despite promises by Korean authorities,” there had been little progress in efforts to release Iran’s blocked assets.
- Kanani notably underscored that Iran was pursuing the legal route “in parallel” with diplomatic efforts to unfreeze the funds.
Newspapers close to the Raisi administration welcomed the move on July 30.
- Javan, affiliated with the Islamic Revolutionary Guard Corps (IRGC), urged the government to “make South Korea pay” and accused Seoul of “stealing” Iranian assets.
- Government-run Iran newspaper hailed the Raisi administration’s “active diplomacy” and vowed “no reservations in defending national interests.”
On the other hand, Reformist newspaper Etemad cited industry experts as saying that Iran needs to address the root cause for why its assets abroad are frozen.
- Peyman Molavi was on July 30 quoted as saying that as long as Iran is under western sanctions, it will continue to face “an issue named blocked assets.”
- Etemad also cited Masoud Daneshmand, a member of Iran’s Chamber of Commerce, as calling for the sanctions to be addressed.
Tehran has been unable to directly access much of its assets held abroad since 2018, when the US unilaterally pulled out of the 2015 Iran nuclear deal.
- Beyond South Korea, neighboring Iraq has also faced difficulties in paying for imports from Iran. To resolve this issue, Baghdad and Tehran recently signed a barter deal which allows Iraq to pay for the import of electricity and gas from Iran with oil.
- While details of the Iran-Iraq deal have been kept under wraps, some reports claim that Tehran is due to receive 30,000 barrels of crude oil and 70,000 barrels of heavy fuel oil per day.
The context/analysis: South Korea’s freezing of Iranian assets has been a point of contention between Seoul and Tehran since the Donald Trump administration (2017-21) abrogated the nuclear deal and reimposed sanctions against Iran in 2018.
- Iran and South Korea have held numerous meetings in past years to find a way to facilitate the release of the funds. However, those talks have been unfruitful given that the US has refused to permit the unfreezing of Iran’s assets.
- Reports in Aug. 2020 claimed that Tehran had begun legal proceedings against Seoul over its frozen funds.
- Amid the fraying of bilateral ties, a South Korean tanker was temporarily seized in 2021 over alleged “environmental pollution.” In the same year, Iran moved to ban the import of South Korean home appliances.
- In Oct. 2022, state media alleged that Iran’s blocked assets in South Korea had been released.
There have been numerous reports in recent months about Iran and the US indirectly negotiating the release of frozen Iranian funds in return for the freeing of American citizens imprisoned in Iran.
- Reports emerged on July 21 that another American national has been detained in Iran, complicating the ongoing prisoner swap negotiations. The incident may also be tied to Iran’s decision to talk up legal proceedings against South Korea.
While the US has not shown flexibility on Iran’s funds in South Korea, there are indications of a different approach to Iranian assets held in Iraq.
- On July 24, the US confirmed that a portion of blocked Iranian funds in Iraq will be moved to Oman so that Iran cannot use it as “leverage” against its neighbor to the west.
- According to a US State Department spokesman, the funds can only be used for “non-sanctionable activities, such as humanitarian assistance.” The US Treasury will have to approve any transactions.
The future: Iran has long criticized South Korea for detaining its assets under US extraterritorial sanctions, charging that it is unlawful.
- Taking legal action is a time-consuming process with no guarantee of the desired outcome. The Raisi administration is likely cognizant of this reality and may seek to talk up the prospect of legal action for domestic purposes.
- Striking a deal with the US remains the most reliable and speedy approach for Iran to regain access to its assets in South Korea. In this context, talk of legal action against South Korea may also revolve around Iranian signaling to Washington that Tehran has options—even if they may be risky and time-consuming.
https://amwaj.media/media-monitor/as-iran-us-prisoner-swap-stalls-tehran-prepares-legal-action-to-unfreeze-assets