Tensions between Iran and South Korea

KOREA CHAIR EXPLAINS • 14/01/2021

By Tongfi Kim

14.01.2021

On 4 January 2021, less than a week before the scheduled visit of South Korea’s First Vice Foreign Minister Choi Jong-kun, Iran seized the South Korean chemical tanker Hankuk Chemi and its 20-member crew near the Strait of Hormuz between the Persian Gulf and the Gulf of Oman. South Korea immediately dispatched the Cheonghae anti-piracy unit to waters near the Strait of Hormuz. The Iranian government insists that a “technical” matter of marine pollution triggered the seizure, but Tehran has so far not presented the evidence according to South Korea’s Ministry of Foreign Affairs.

What is the political background to the new tensions?

It is widely speculated that Iran detained the South Korean-flagged ship to recover its funds frozen in South Korean banks as a result of U.S. sanctions against Iran. The amount of oil sale money Iran demands to retrieve from South Korea is reported to be around US$ 7 billion, but media reports also indicate that over US$ 9.5 billion of Iranian funds across multiple banks are frozen in South Korea. Seoul, previously a big importer of Iranian oil, stopped importing Iranian oil in May 2019 as waivers on U.S. sanctions against the Islamic Republic ended, and Iranian funds were subsequently frozen. The Iranians have been frustrated by South Korea’s refusal to release the funds or to pay the interests, and some have previously suggested that Iran should stop South Korean ships in the waterway as a warning to South Korea and other countries. The Strait of Hormuz is a well-known maritime transit chokepoint, through which one third of total global seaborne traded oil is carried.

Fortunately, neither Tehran nor Seoul has incentives to militarily escalate the dispute. The safety of the detained crew has been confirmed, and the dispatch of the Cheonghae unit by South Korea is likely to be for a symbolic purpose. In fact, the anti-piracy unit with a naval destroyer and a crew of about 300 had already been deployed in the region in 2020. In early 2020, South Korea decided to expand the operational area of the unit because the United States was setting up a coalition to protect shipping against Iran. While accommodating Washington’s request, Seoul kept its mission separate from the U.S.-led coalition to make South Korea’s naval deployment less provocative to Iran.

What are the likely trajectories of the disputes?

As of 14 January 2021, there is no clear path out of the disputes involving the South Korean tanker and the Iranian frozen assets. Whether or not the tanker actually polluted the water, politics are likely to determine when the crew will be released and when the Iranian funds will be released. South Korea and Iran have been reportedly negotiating a deal where Tehran sought to link the frozen assets to the acquisition of COVID-19 vaccines, and other kinds of deals that use humanitarian exemptions to U.S. sanctions may be also possible. Moreover, with Joe Biden in the White House soon, U.S. policy toward Iran may change significantly. It is hard to predict how these disputes will play out, but U.S. foreign policy toward Iran is likely to have a major impact, and the outcomes of the disputes will be an important indicator of Iran’s changing position in the international society.