Hopes for South Korea restarting trade with Iran have been raised following a landmark nuclear deal between the Middle Eastern nation and a group of six powers led by the U.S.
Key sectors such as automobiles and petrochemicals, which are blocked from trade with Iran under sanctions by the U.S. Treasury’s Office of Foreign Assets Control, are expected to be revitalized, analysts said.
As an initial lightening of curbs, the deal would suspend economic sanctions on Iran’s auto and petrochemical industries. This would pave the way for Korean companies, especially small and medium auto enterprises, to resume exports to Iran, where about 50 percent of its auto parts were previously imported from Korea.
“The gradual lifting of such sanctions will benefit not only Korean auto parts makers but also the steel and petrochemical industries,” said a researcher at the Korea Institute for International Economic Policy.
The Bank of Korea also projected an increase in exports of auto parts due to the nuclear deal between Iran and the six powers.
However, Korean policymakers remained cautious as the parties clinched an “interim” deal after six months of negotiations, meaning that some of the tough sanctions on Iran could remain as long as the Islamic Republic does not show full commitment.
A policymaker in Seoul said that the U.S. held the “key” to this deal, but that Congress may not support it if it sees that Iran is not following through with its commitment.
The deal does not point to a complete suspension of Iran’s uranium enrichment program.
Even though the interim deal eases some sanctions on Iran’s economy, its oil exports, the country’s main source of growth, will remain under tight restrictions. On top of this, global investors will be held back from investing in Iran’s energy sector.
Korea, which depends on oil to maintain its economic growth, saw its oil imports from the Middle Eastern country fall by about 20 percent on average per year over the last two years. This was following tougher sanctions imposed by the international community, led by the U.S., according to the Ministry of Trade, Industry and Energy.
Korean exports to Iran, which totaled about $2.3 billion from January to April, 2012, fell to $1.8 billion during the same period this year, even though Korea has been exempted by the U.S from the list of countries barred from conducting oil transactions with Iran.
The decrease in trade with Iran impelled Korea to provide relief, including liquidity injections and debt rollovers, to small and medium enterprises in the first half of this year.
