Posted August. 09, 2010 11:26,
Damage to Korean companies doing business with Iran is mounting due to U.S. and European Union-led sanctions on the Islamic country.
Countries worldwide are moving to sanction Iran en masse, increasingly narrowing room for financial transactions with the country.
Koreas financial regulator has asked domestic commercial banks to find ways to continue financial transactions for trading with Iran without violating the sanctions.
This suggestion came after the full suspension of trade transactions at Iran`s state-owned Bank Mellat after its Seoul branch was targeted for sanctions. Koreas export-import volume with Iran is worth four billion dollars per year, two thirds of which had been conducted via the Seoul branch.
Korean commercial banks reportedly asked last week about conducting financial transactions for trade to financial institutions not only in the Middle East, including the United Arab Emirates and Saudi Arabia, but also in China. The banks, however, have received no positive responses.
A source at a Korean commercial bank said, To continue trade transactions with Iran, securing financial transaction partners is essential, adding, Weve asked financial institutions worldwide whether trade financing can be arranged but have yet to find alternatives.
Financial trade with Iran has been blocked because major governments worldwide have joined Washington in sanctioning Tehran. To conduct export-import transactions with Iran, Korea must use currencies such as the dollar and euro for international settlement. This has proved impossible, however, as U.S. and European financial institutions have cut off financial trade with Iran.
Japan and the UAE are also expected to join the sanctions, so trading with the Japanese yen and UAE dirham will likely be suspended as well.
As a result, more than 2,000 Korean companies doing business with Iran are suffering mounting damage. Most of them are small or medium sized with weak financing capacity, and thus many could face bankruptcy.
A survey of 76 smaller companies conducted by the Korea Federation of Small and Medium Business Sunday found that 56 percent of small and medium-size companies doing export-import trade with Iran have suffered damage.
Among the respondents, 31.5 percent said export transactions have come to a complete halt and 34.7 percent replied that they expect damage in the coming months.
A federation source said, Measures to reduce damage on smaller companies trading with Iran are urgently needed, including detoured exports via a third country or assistance through emergency loans.