S.Korea limits exports to Iran on payment concerns
(Reuters) - South Korea has imposed limits on its exports to Iran - mainly steel, cars and electronics - to reduce its risk of payment defaults as western sanctions disrupt Iranian oil exports, the Korea International Trade Association (KITA) said.
The KITA statement confirms an earlier Reuters report that Asia's fourth-largest economy, which sold $1.7 billion of goods in Iran in the first quarter of this year, would seek to impose export limits.
"A self-imposed export control including setting settlement ceilings for exports to Iran starts from June 12 for those exporters who receive payments from the Iranian central bank's won-denominated accounts at local banks," South Korea's representative trade body said on its web site (www.kita.net) in a statement dated June 12.
KITA said the measure had been taken in advance of planned European Union sanctions on insuring Iranian oil tankers. It also came as South Korea won an exemption from U.S. sanctions thanks to its cuts in oil imports from Iran.
"Details such as what each firm's payment ceiling is, when and how the ceiling will be given will be finalised once there is confirmation on whether or not the European Union will extend their shipment insurance and reinsurance."
KITA is the largest business organization in Korea with over 71,000 member companies.
Fresh export deals to Iran will be approved only if their payment period is within 180 days to reduce uncertainty in payment settlement, it said.
"This is temporary to prepare for the situation that Iranian crude imports do not go smoothly, and it will be lifted if the trading condition with Iran improves sharply," KITA also said.
Western countries have stepped up sanctions on Iran over its nuclear programme which Washington and its allies suspect is a cover for developing the capability to make an atomic bomb.
Tehran says it is only interested in using nuclear power for generating electricity and other peaceful projects.
Two sources with knowledge of the issue told Reuters last month that Seoul was considering cutting its exports to Iran.
Export quotas could be imposed on products including Samsung Electronics' mobile phones and Hyundai Motor's vehicles, one of the sources said.
South Korea, a major buyer of Iranian crude along with China, India and Japan, managed to receive U.S. exemptions on Iran's oil trade on Monday along with six other economies in return for significantly cutting purchases of Iranian oil.
Still a bigger issue remains as it is not yet clear whether separate European sanctions blocking access to tanker insurance will cause shipments to grind to a halt from July 1.
Industry sources said that Korean refiners will halt Iranian oil imports from July, while Seoul has been in talks with the EU over the insurance ban.
International sanctions have already made it difficult for Iran to repatriate oil payments from South Korea and other countries.
The Iranian central bank has accumulated the equivalent of $5-$6 billion in won accounts in South Korea, industry sources noted last month. Around 2,000 South Korean companies are exporting to Iran, according to the government.
Iran had a $5.3 billion trade surplus with South Korea in 2011, data from KITA shows. Iran's trade surplus in the first four month of 2012 was $1.7 billion, down 14 percent from the surplus in the same period of last year.
South Korea imported 25.25 million barrels of oil from Iran in January-April of 2012, down about 10 percent from a year ago, according to state-run Korea National Oil Corp (KNOC).