Repercussions of US Sanctions on Iran
Since the US decided to impose sanctions on Iran again, Korea's trade with the Middle East country has shrunken. Korea’s trade with Iran is expected to face more difficulties as the US resumes sanctions on some items starting on August 6.
According to the trade industry on August 5, the US will resume sanctions on Iran starting on August 6. On May 8, the US announced the resumption of sanctions and set up a 90- or 180-day grace period for each item. Items such as automobiles, gold, iron and coal will be subject to the sanctions when the 90-day grace period ends on August 6.
The US warned that countries and companies that trade sanctioned items with Iran could be subject to second sanctions. For this reason, Korean companies have gradually reduced their trade with Iran since the US declared the restoration of the sanctions on Iran. According to the Korea International Trade Association, Korea's exports to Iran in the January-June period of this year added up to US$ 1,722 million, down 15.4 percent from the previous year. Exports to Iran fell 19.4 percent in July.
Exports are expected to further decline if and when the sanctions are in full force. Korea's exports to Iran hit US$ 6,257 million in 2012, but then dropped to $ 4,481 million in 2013 after the Obama administration imposed sanctions on Iran. The figure steadily dwindled to US$ 3,717 million in 2016 and only rebounded last year but is now facing an unexpected variable –- the US’s sanctions on Iran.
What is even more damaging to the Korean economy is a sanction on Korea’s oil imports from Iran that will meet the end of the 180-day grace period on November 4. The Korean government is in talks with the US government to exclude crude oil which accounts for the bulk of Korea’s imports from Iran from the US’s sanction list. In the past, Korea continued to import crude oil from Iran by reducing oil imports from Iran as Korea got the US to recognize Korea as an exceptional case.
In the past, Korea became a special case to import Iranina oil during the Obama administration by curtailing imports of Iranian oil 20 percent. But the Trump administration is said to demand an additional reduction in Korea’s oil imports from Iran. Korea's imports of Iranian crude oil totaled US$ 3.283 billion from January to June this year, down 18.5 percent from the same period last year. If Korean’s imports of Iranian crude oil are put on hold, it will decrease Korea’s trade with Iran as trade using Korean won payment accounts at Korean banks will be inevitably stopped.