Prepared by: Sahar Mozafarian of SGPM
The freezing of Iranian assets first started in 1979, following the Islamic Revolution. The former U.S. President, Jimmy Carter, froze $11 BLN of Iran’s assets and banned the import of oil from the country. Since then, there have been many twists and turns regarding Iran’s frozen funds around the world. Some reports suggest that Iran’s frozen assets amount to in excess of $100 BLN (please name the source) . In the following report, SGPM will look into reports on Iran’s frozen assets in Korea, China, the U.S., and Iraq.
Iran and Korea’s bilateral ties have remained strong over the years. Iran’s imports from Korea hit $736 MLN in the year to March 2023, some 1.2% of total imports ranking the 12th largest exporter to Iran. This comes as imports for the year to March 2022 and March 2021 stood at $600.5 MLN accounting for 1.1% and $586.1 MLN accounting for 1.5% of total imports respectively. However, tensions between the two sides are at a new high due to Korea’s failure to free Iran’s frozen assets. Prior to 2018, Korea was the third largest crude oil buyer from Iran. However, following the U.S. pullout from the Joint Comprehensive Plan of Action (JCPOA) in April 2018 and the re-instatement of banking sanctions against Iran, Korea froze Iranian funds in two Korean banks: Woori Bank and the Industrial Bank of Korea.
Since then, Iran has been pursuing the release of these assets through many rounds of negotiations. There were even suggestions of importing Korean cars to Iran from these frozen funds; an action that could have helped Iran’s volatile vehicle market, however; neither have proven fruitful.
Since 2018, numerous rumors have circled the media regarding the amount and the timing of releasing Iran’s assets from Korea; the latest being in June 2023 which reported the imminent release of $10 BLN (please name the source). However, there has been no positive outcome to date. In February 2022, Korean media outlets reported that the Central Bank of Iran (CBI) has written a letter to the Investor-state Dispute Settlement (ISDS) in this regard. If this letter does not lead to a desirable outcome CBI threatened to
take legal action. Interestingly, Iranian media reported in late-July 2023 that Iran will start legal action against Korea for freezing its funds and that it “will spare no legal efforts in this case.” The Parliament has also shown its support and suggested that should Korea fail to release Iran’s funds; they will prohibit the import of Korean goods to Iran.
Iran and Iraq’s bilateral relations have reached new highs, both politically and economically. In the year to March 2023, Iraq’s exports to Iran stood at $204.5 MLN, ranking the 18th largest exporter to Iran. Interestingly, Iran is a major energy supplier to Iraq and supplies Baghdad and Basra with natural gas to fuel their power plants. In 2022, some 9.4 BLN CUM of natural gas was exported to Iraq worth over $4 BLN. However, with regards to banking limitations and sanctions, Iraq was unable to pay Iran for the natural gas and electricity it has received. This payment is estimated over $10 BLN. After many discussions between the two sides, it was announced in early July 2023 that all of Tehran’s frozen assets have been released and deposited to the Trade Bank of Iraq. The released funds will be utilized for purchasing goods that are not subject to U.S. sanctions. Interestingly, in June 2023 the Chairman of the Iran-Iraq Joint Chamber of Commerce, Mr. Al-e Eshagh, stated that $2.7 BLN of Iran’s frozen assets have been released and that part of these funds will be allocated to Iranian pilgrims travelling to Mecca while the rest will be for importing essential goods.
Despite Iran and China having very close bilateral relations, there have been rumors suggesting that Iranian funds are frozen in the country. Iran’s imports from China stood at $15.4 BLN in the year to March 2023, ranking it as the second largest exporter to Iran. This is an increase of $2.7 BLN compared to the year to March 2022; where Chinese’s exports to Iran were $12.7 BLN. In late-July 2023, the Head of the Iran-China Friendship Association, Mr. Boroojerdi, refuted claims that Iran’s assets have been frozen in China and stated that according to the agreements met by the central banks of the two countries, there are no issues regarding the freezing of Iran’s funds.
Prior to the 1979 Revolutions, ties between the two sides were very strong. However, over the past 45 years, bilateral relations have headed on a downward slope; an issue that can be reflected in trade figures. In the year to March 2023, U.S.A. exports to Iran stood at $99.4 MLN, less than 0.2% of total exports to Iran. This illustrates a decrease of $1.5 MLN compared to the year to March 2022. As mentioned, the issue of blocked Iranian assets in the U.S.A. has been ongoing for over four decades. In a more recent turn of events, in late-March 2023, the International Court of Justice (ICJ) ordered the U.S.A. to pay compensation – the exact amount of which will be determined in the future – to Iranian companies after ruling that the country had illegally allowed courts to freeze their assets.
The legal case was made in 2016 for breaching a 1955 friendship treaty between Iran and USA. U.S.A. officially left this treaty in 2018. The case claimed that the assets of the Iranian commercial companies and entities were frozen prior to 2018; while the friendship treaty was still in place. In regards to the $1.8 BLN of the CBI’s frozen funds, ICJ announced that since it is not a commercial enterprise, it will not be protected by the friendship treaty. It is worth noting that although the rulings of ICJ are binding, the court does not have the means of enforcing them.
Sources: Aljazeera, Donyay-e Eghtesad, IRNA, ISNA, Mehr, RFI, Reuters, Tasmin, Tehran Times