South Korea sanctions Iran – under US pressure

South Korea on Wednesday reluctantly joined the US-led drive for sanctions against Iran after an internal struggle that pitted financial interests against diplomatic interests – and strained the US-Korean alliance.

Under US pressure, the South Korean foreign ministry added the names of 102 Iranian firms and 24 people to the blacklist of those with whom South Koreans cannot do business and also promised to inspect cargo from Iran more diligently and hold back on investment in oil and gas enterprises.

The foreign ministry, however, did not shut down the Seoul branch of Bank Mellat, which US agents have pinpointed as a crucial conduit for Iranian business in the region. Rather, the ministry said the bank would face “severe” unspecified penalties that may include a temporary suspension of activities, but not the complete closure the US had wanted.

South Korea implemented sanctions despite the qualms of the finance ministry and some major South Korean firms, which complained of the risks of upsetting economic ties with a nation that is the source of nearly 10 percent of South Korea’s oil imports as well as major construction contracts. Iran has warned that those who join in the sanctions may face tariff increases of 200 percent – a move that would cut deeply into South Korean exports of vehicles and electronic items.

Soothing tensions between US and South Korea

The government hoped to “minimize the impact” in negotiations with Iran, a foreign ministry official told a reporter in Seoul, attempting to downplay tensions with South Korean financial interests.

Another foreign ministry official said that Iran was expected “to join international efforts for nuclear nonproliferation” and “implement its obligation” under UN Security Council resolutions – very much a pro forma statement in line with previous statements by the US and others to compel Iran to halt its nuclear program.

Despite the hesitance and heightened tension, the South Korean decision was seen as inevitable, especially in view of US and South Korean cooperation on strengthened sanctions against North Korea.

Daniel Glaser, deputy assistant secretary of the treasury, called South Korean cooperation “absolutely vital” in a visit to Seoul in early August, and Robert Einhorn, the State Department’s top official on nonproliferation and arms control, made the point in conversations with South Korean officials in Seoul and Washington.

Central to US arguments for sanctions against Iran has been that the US has fully supported South Korea on North Korea in the aftermath of the sinking in March of a South Korean navy vessel. A South Korean investigation has concluded that a torpedo fired by a North Korean midget submarine was responsible for splitting the ship in two and sinking it in minutes with the loss of 46 sailors.

Politics and economics of sanctions

The South Korean decision is “more significant in the sense that we’re pursuing all these sanctions on North Korea,” says Victor Cha, a former director of Asian affairs at the National Security Council. “It would look ridiculous if we didn’t have sanctions on Iran.”

Mr. Cha, now a professor at Georgetown University in Washington, D.C., notes that South Korea’s decision comes after a number of other countries had already adopted sanctions. “It helped that the Japanese announced sanctions,” he observes. “The South Koreans couldn’t wait much longer.”

Doubts persist, however, as to the effectiveness with which South Korea wants to enforce the sanctions on a country that is its fourth biggest source of oil.

"It’s a political signal as much as an economic one,” says Nicholas Eberstadt, a political economist at the American Enterprise Institute. “As a political signal, that’s really significant.”

Mr. Eberstadt, who has written numerous books and articles on North Korea, agrees that sanctions on Iran come as “part of the quid pro quo of sanctions against the DPRK” – that is, the Democratic People’s Republic of Korea.

As for South Korea’s hesitation to go along with US demands for sanctions, he says the South Korean decision “indicates a new and stronger coordination among allies on nonproliferation.”

It’s “an important step,” says Eberstadt. “The economic consequences remain to be seen.”