The Ministry of Foreign Affairs headquarters in Seoul. (Ministry of Foreign Affairs)

South Korea’s Ministry of Foreign Affairs on Friday expressed hope for a "seamless resolution" after the release of news reports that Iran has secured assurances from the US that it would be able to unfreeze its funds in Korea.

"Our government has been closely collaborating with relevant countries such as the US and Iran to address the frozen fund issue,” an official from Korea’s Ministry of Foreign Affairs added during a meeting with local press Friday.

According to industry sources Friday, the US agreed to release frozen Iranian funds in Korea. In exchange, Iran may release five detained US citizens.

Approximately $7 billion worth of Iranian funds became stuck in the state-operated Industrial Bank of Korea (IBK) and Woori Bank after the two Korean banks refrained from processing them in response to US sanctions.

An IBK official declined to verify the current status of the money on Friday, saying, "The process is being carried out through government-to-government discussions, so at this point, we are unable to provide specific details."

Similarly, an official from Woori Bank affirmed that the transfer of Iranian funds would keep to the terms established by the government, and declined to provide further information.

In 2010, Iran had established accounts in the name of the Central Bank of Iran across various countries, including South Korea, and had been receiving payments for oil and gas through those accounts.

However, the US government in 2018 withdrew from the Iran nuclear deal and reinstated sanctions against Iran. Consequently, during this period, Korean banks froze Iranian funds.

While Korean banks have refused to comment, Iran's state-run Islamic Republic News Agency (IRNA) reported that the $7 billion which used to be frozen in South Korean banks has now been transferred to a bank in Switzerland.

In accordance with the negotiated agreement between the US and Iran, the Iranian funds are currently in the form of euros and preparations are underway to send the money to an account within the Qatar Central Bank, the news agency said.

It also explained that the detained US prisoners will not be released until the money is transferred to these specific accounts designated by Iran.