South Korea would join Japan in seeking a waiver if the United States imposed new sanctions that threaten the flow of oil from Iran by shutting down payment channels for Iranian crude, government officials said on Thursday, Reuters reported.
South Korea is the world's fifth-largest crude importer and Iran supplies about 10 percent of the oil it needs to feed its industrialized, export-driven economy.
Seoul is one of Washington's close allies in the region, and will probably seek an exemption from U.S. legislation that threatens reprisals in the United States for financial institutions that deal with Iran's central bank.
If South Korea fails to achieve a waiver, it may seek a grace period to make new arrangements and avoid falling foul of the sanctions, they added. Iran holds accounts at state-owned Woori Bank and Industrial Bank of Korea (IBK) for oil payments, and Seoul wants to keep them open.
"We are not considering closing the won-denominated account as it is highly likely that Woori and IBK won't be affected by the bill even if it is approved," a government source told Reuters.
South Korea is expected to announce additional sanctions on Iran as early as this week, but measures would be likely to mirror those imposed on Iran by Japan last week and would not include a ban on importing crude from Iran, sources said. Japan toughened its sanctions on Iran last week.
"We have never considered (a crude oil imports ban) and have not received any request," another source at the foreign affairs ministry in Seoul said.
The United States is in consultation with all parties including China on new sanctions against Iran, Deputy Secretary of Energy Daniel Poneman said on Wednesday in Tokyo.
Last year, the Korean government allowed Iran's central bank to open accounts denominated in Korean won for oil payments after South Korea blacklisted the Seoul branch of Bank Mellat and 101 other Iranian companies under international sanctions.
Even with those accounts, Iran has been unable to repatriate the petrodollars or spend it in South Korea. The accounts at IBK and Woori Bank are estimated to hold up to $5 billion of oil money. Iran can use the accounts to buy goods from South Korea but runs a trade surplus of hundreds of millions of dollars every month with Seoul.
Following U.S. pressure to beef up sanctions, sources at the South Korea government had said South Korea might ban Iranian petrochemical product imports.
South Korea imported $350 million worth of Iranian petrochemicals last year, while exporting $450 million worth of its own petrochemicals to Iran. South Korea's global trade in petrochemicals last year totalled $49 billion.
Edited by: S. Isayev