South Korea will start a euro-based settlement system for trade with Iran next week, one of the biggest financial barriers for trade with Iran, following the lifting of international sanctions, the financial minister said Thursday, Yonhap news Agency reported.
"The euro-based settlement system for South Korea-Iran trade will start on Aug. 29," Finance Minister Yoo Il-ho told reporters after a policy meeting held in Seoul. "The opening of the system will help further promote bilateral trade and investment."
Following the landmark nuclear deal earlier this year, the international community decided to lift its blanket sanctions imposed on Iran, but money transactions based on the U.S. dollar have still remained forbidden.
The two countries have used a won-based settlement system since September 2010 to bypass trade restrictions and allow the two sides to conduct trade, without violating the embargo.
Under the current system, two local banks -- Woori Bank and the Industrial Bank of Korea -- have their own accounts at the Iranian central bank, and trade payments are made through the accounts.
A South Korean company buys a product from Iran and deposits the money into one of the accounts, while Iran's central bank confirms the transfer and gives the Iranian seller rial, the Iranian currency.
The South Korean government has made efforts to set up a new settlement system as an alternative method that can possible expand trade and investment with the oil-rich country.
The finance minister said KEB Hana Bank, Shinhan Bank and Woori Bank will handle the euro-based payment system, which uses the euro as a medium of trade, which is widely preferred by Iranian companies.
Industry data showed that the trade volume between Korea and Iran stood at US$6.1 billion in 2015, down sharply from $17.4 billion in 2011 due to the sanctions.