Seoul will continue trade with Tehran

Iranian Diplomacy – South Korea’s Ambassador to Iran says they will continue trade with Tehran despite sanctions, highlights using Korean Won instead of US dollar in interview with Reza Zandi.

They had stopped purchasing Iranian oil and condensates three months prior to the imposition of secondary sanctions, while they were selling their products to Iran, ranging from household appliances to cars, and mobile phones. That was the big question looming in my head, so one day I decided to write: “It is better to keep the country’s market open to those who purchase Iran’s oil.” Feeling pity for our country, I took my written request to Sheikh Bahaei Street, requesting an interview with South Korea’s ambassador so I could ask my questions. I followed up on the issue and didn’t lose hope for two months.

“Since I came to Iran, I am half Iranian, and half Korean.” Korean ambassador said that three weeks ago while I was having lunch with him and two of his colleagues, at the time when the US list of exemptions had not been announced yet. I thought I could do the interview with South Korea’s ambassador to Tehran at that very meeting, but it ended up being a simple off-the-record conversation so that it wouldn’t jeopardize Koreans’ negotiations to receive waivers from the US. We were awaiting good news and I could understand the situation. I asked my general questions and heard Mr. Ambassador’s responses. Mr. Ryu Jeong-Hyun promised to have an interview right after the waivers issue was concluded. He told me about his interest in Iran’s rich culture and I told him about the fact that I had watched the Korean TV series Jewel in the Palace twice to understand the complications of power structure. Two days after the US Secretary of State officially broke the news on waivers, South Korea’s Ambassador to Tehran fulfilled his promise, so I went to his office in the embassy.

He has placed two flags next to his working desk inside the South Korean embassy. One is the Iranian flag and the other is the Republic of Korea’s. Ryu Jeong Hyun has come to Iran since 6 months ago as South Korea’s Ambassador to Tehran. He had been the Director General of Middle East Affairs in South Korea’s Ministry of Foreign Affairs, therefore he came to Iran with a proper knowledge of the region. He is friendly, well-dressed, and just like all Koreans, polite. He allows the extension of time for the interview beyond our formerly agreed time. I asked him about the reason behind not buying Iranian oil prior to the re-imposition of sanctions as well as the difficult process of getting exemptions from the Americans. Mr. Ambassador elaborated on exemption conditions and Iran’s way of using its oil money. He also talked about his country’s diversification policy in foreign policy.

If you are interested in finding out the connection between naming a Tehran Street in Seoul and Iran-Korea Oil trade, Read this report.

With its oil money, what kind of goods can or cannot Iran buy from Korea? Mr. Ambassador briefly talked about that. When I asked “your country is an ally of the US, how do you think Iran and the US should resolve the tensions between them?” he replied “This is the most difficult question of the day.” To change the mood, after the interview, as a token I gave him the two-volume “Proper Cooking – from A to Z” written by Nadjaf Daryabandari, renowned author and translator who used to work in Iran’s oil industry. Find out some very important points on different lines of this report:

Mr. Ambassador, allow me to begin with asking about how Korea managed to get the exemptions from the US sanctions?

South Korea began its negotiations with the US right after the US withdrawal from the JCPOA in May. Since we knew that importing Iranian oil is of great importance to South Korean firms, we had to take necessary measures. That’s why we began our activities right then.

Your country had stopped purchasing Iran’s oil four months prior to the imposition of secondary sanctions. Was that a measure taken by South Korea to get exemption in order to continue importing Iran’s oil?

The decision on whether to import Iranian oil and condensate is taken by private Korean companies, therefore the decision to reduce importing Iran’s crude was also taken by private companies. The government of Korea has no control or supervision over this issue, despite the fact that reducing the Iranian oil import was not the Korean government’s choice, but in the end it was a strategy to get Iran oil purchase waivers. The Korean government figured out that not importing Iran’s oil would lead to deficit for Korean firms that was the reason why it entered continuous negotiations with the US government.

Were the negotiations to get exemption tough?

I was not there during the negotiations. I don’t know the details. I have heard from my colleagues that this time it was much harder than that of 2012. We had managed to get exemptions then too.

Now that South Korea is exempted, how much oil can it buy from Iran on a daily basis?

The treasury and the Secretary of State Department of the US have announced that they have exempted eight countries, but they didn’t give further details. Korean government possibly knows the details, but I can’t tell you about the exact quality of these exemptions. The important issue is that Korea has managed to maintain trade with Iran. Most of the Korean media outlets have evaluated Korea-US negotiation as a success.

South Korea has managed to get exemption to import Iran’s oil, but Iran possesses large sums of money in Korean banks for its crude and condensate export to Korea. Have you received waivers for Iran to use this money as well as importing Korean goods? Do you know the amount of Iran’s money deposited in Korean banks?

Yes. In addition to waivers on importing Iran’s oil, we have also received waivers on using won for transactions with Iran so that we can continue doing business with Iran using our country’s own payment system. I cannot give you an accurate amount now, but I know Iran has deposited great sums of money in Korean accounts.

I suppose Iran can only import Korean goods with its oil export revenue, while being unable to exchange that money into other currencies before entering the money into the country, is that right?

According to the won-based payment system, Iran’s oil revenue stays in Korean accounts so that it can be used in exchange for Korean goods bought by Iran. This money cannot be exchanged to other currencies and is not directly given to Iran.

Can Iran import any products from Korea, or it’s limited to food and medicine only?

Iran cannot buy the products that are included in the sanctions list, but it can buy other goods such as food and medicine.

Can Iranians for example buy home appliances and cars from South Korea?

Yes, Iran can buy the goods and products that are not included in the sanctions’ list.

Mr. Ambassador, I think Korea’s trade volume with Iran is under 1% of its total trade worldwide, while the rate is 12% with the US. I understand Korea’s obligations with regard to these numbers, but one of the most important responsibilities of an ambassador is to expand the relation between his/her own country that he is serving inside. What are your plans for the expansion of ties between Iran and Korea during your mission?

Despite the great importance of the two countries’ relationship, the volume of export to Iran is low. I believe that there should be an expansion of trade volume with regards to Iran’s importance in the region. Korean government’s foreign policy is to diversify relations with different countries (internationally). Diversification doesn’t mean strengthening ties with powerful countries only. It translates into expanding ties with different countries. Our relationship with Iran has always been important, therefore it continues. My first concern after the return of sanctions was the continuation of relationship with Iran. Everyone in Korea knows that currently Iran’s relation with the international community is going through tough times. At the same time, everyone knows how important Iran is geographically and geopolitically. Korean people know about Iran’s rich history. They all know Tehran Street in Seoul. They also know why that street was named “Tehran.”

So Koreans know that despite some countries’ oil embargo in 1970s, Iran stood by its commitments in its contract to export oil to Korea with the agreed price and in return, Korea named one of Seoul’s streets “Tehran” as a sign of appreciation?

Yes, in 1980s during the Iraq-Iran war, when most international companies had left Iran, various Korean companies stayed in Iran and fulfilled their commitments. There’s long-standing trust between the two countries. When the US withdrew from the JCPOA in May, the rumor was spread among Iranian society that all Korean companies were trying to leave Iran and cease business with the country, but that was just a rumor and was false. Iranian people might have not totally understood that Korean companies’ strategy was to get exemptions by minimizing their staff and activities in Iran, but they had not left Iran. Now with the exemptions, there’s a chance to maintain and expand relation between the two countries. Our purchase of Iranian oil and selling of goods is a basis for the continuation and expansion of relations. We would definitely maintain our relationship.

How about 180 days later? What would you do when the exemption timeframe is closed?

The exemptions wouldn’t end after 180 days. We would negotiate again and we expect reaching good conclusions. Importing Iranian gas condensates is of great importance to Korean petrochemical companies. Iran has the best condensates in the world. We have properly elaborated these issues to Americans and they comprehended the vitality of Iranian gas condensates to Korea. Getting the exemptions was also important in Korea-US relation.

Do you mean to say that in case the US wouldn’t have granted waivers to South Korea without such understanding of the Korean economy that could have led to tensions in Korea-US ties?

Some South Korean media had published analyses on the urgency of South Korea’s cooperation with the US because of North Korea issues, but if the US wouldn’t grant waivers to South Korea, small tensions are foreseeable.

Mr. Ambassador, you had been the Director General of Middle East affairs in South Korea’s Ministry of Foreign Affairs. You definitely have good grasp of the situation in the region. How do you evaluate Iran’s position in the region when it comes to power and influence?

This is a sensitive and critical question. I believe Iran is an important country in the region like being at the center of an atom. Saudi Arabia wouldn’t like my response if they find out about it. Some say that Iran and Saudi Arabia are like two axes in the Middle East, but I think that is not right. Iran is much stronger than Saudi Arabia. You can’t compare the two. Iran has a great number of power components. One of them is Iran’s 82 million population. Iran is a big country with various industries such as car manufacturing and advanced agriculture. It also possesses powerful and sustainable economy. Iran has cultured, educated young people who are its high quality human resource. We know that the global politics atmosphere is not going to be the same all the time and Iran’s problems with the international community would be resolved. Iran is also a geographically important country connecting Central Asia, Southern Asia, Europe and Africa. Persian culture and Empire (at the times of Cyrus the Great) influenced everywhere.

Mr. Ambassador, the Republic of Korea is a close ally of the US. You had told me once, that since you became an ambassador in Iran, half of you has become Iran and the other half is Korean (for the sake of helping the two countries’ bilateral ties.) Now if I ask you how Iran and the US could resolve their issues, how would you respond as a politician? I remember a Korean buyer of Iranian oil had told Iranian negotiators to go resolve their issues with the US so that they can easily purchase Iran’s crude. How do you think the tension between Iran and the US can be resolved?

This is today’s toughest question. If I reply diplomatically, it wouldn’t be interesting to you. If I decide to give you an explicit response, then I wouldn’t be a diplomat. I have thirty years of diplomatic experience. We diplomats share a famous statement that says there are no friends or enemies for good. In the end what matters is the national interest. A responsible politician always puts national interest first. Authorities always think about how to meet their countries’ national interests and how to cooperate with other countries so that their goal of meeting national interests is met. The Persian, Turkish, and Roman Empire were powerful as long as they welcomed different cultures. They lost power when they ceased to welcome cultural differences. What really matters in resolving the differences is the way the two countries implement their policies of showing flexibility when they experience tension.

During the 180 days’ time frame of Korea’s exemption to buy Iranian oil, should Korea’s import of Iranian oil reduce continuously or it would stay the same throughout the whole period. Can we estimate the import of Iranian crude and condensate to be around 150-200 thousand barrels per day?

Korea can buy a fixed amount of Iranian crude and gas condensates during the 180 days’ time frame, but at the end of the 180 day period, we have to re-negotiate with the US to maintain the same amount. We would need to see whether we would have to reduce the amount or not. Nevertheless I am not (directly) responsible in Iranian oil purchase and I can’t give you an exact number on the import now.

Different Iranian firms active in Petroleum industry purchase Korean equipment to develop their projects. Can these companies continue their cooperation with Korea and import their needed products and equipment?

The details of exemptions such as transportation of oil, insurance issues or selling of equipment have not been clarified yet. Those who have been granted waivers have to negotiate these details.

So it is still not clear whether Iran and Korea would continue their industrial cooperation on importing oil industry equipment? As an example, Korean firms were supposed to participate in Siraf refineries project. The negotiations were going well. Can they resume cooperation on this project now?

Oil industry equipment are mostly included on the sanctions list. We can’t sell those products that are on the list. Of course we have to review the details about the equipment.

How about home appliances?

We can sell home appliances, food and medical products to Iran.

How do you feel when you know that in most Iranian people’s houses, you can find Korean products? Wouldn’t this make you try harder in order for them to have easier access to products and enjoy a better life?

As the ambassador of South Korea, it is a great honor for me to know that Korean products have great number of fans in Iran. I think Korean firms have to feel more responsible regarding Iranian people and market. I highlighted this issue during the Corporate Social Responsibility conference in Tehran last week. Social responsibility is not just selling the goods and making profit. Firms have to interact with customers. Korean firms also have to take this issue seriously and partner up with Iran in sharing their knowledge and technology.

As my final question, and a mood changer, which Iranian food do you favor the most during your 6 month stay in Iran?

Before answering this question, I need to tell you that I participated in South Korean ambassador Taekwondo championship in Iran’s Taekwondo house. Taekwondo originated from Korea, but its great number of enthusiasts in Iran has surprised me. Taekwondo is not just a martial art. Inside, there’s respect for others, respect for the elderly, and abiding by the rules of ethics. Iranians follow these principles fervently. Taekwondo is being practiced in 168 countries, but the ones with the best athletes are Iran and Korea. Just like Koreans, Iranians put forth their best efforts to get the gold medal. That was where I found out that we share many commonalities making us close friends of each other. I invited all Iranian and Korean athletes to my house. Just like Korean food, I love all Iranian dishes.

* This piece was originally published in E’temad Daily on Nov 10, 2018. Reza Zandi is an energy journalist and senior analyst of oil & gas market.