This handout photo taken on April 9, 2021, provided by the South Korean Foreign Ministry, shows the South Korean-flagged tanker 'Hankuk Chemi' departing the Iranian port of Rajai near Bandar Abbas. Photo: AFP/South Korean Foreign Ministry

Iran has released a South Korean tanker it seized near the Strait of Hormuz in January, Seoul’s Foreign Ministry announced on Friday, though major questions hang over what led to this development.

After the Hankuk Chemi was seized by Revolutionary Guards three months ago, Tehran claimed the vessel had been polluting local waters – an allegation denied by the owners.  

Official sources were silent about what led to Friday’s development, but multiple issues are in play, ranging from Iranian cash frozen in South Korean banks to international negotiations on Tehran’s nuclear program and the possible lifting of sanctions.

“The captain and sailors are in good health and it’s been confirmed the ship and its cargoes had no problems,” Seoul’s foreign ministry said in a short statement. “The ship departed Iran after completing administrative procedures.”

The foreign ministry, when contacted by Asia Times, had no further comment to make and was unable to answer questions.

Why the release?

It is possible that the “administrative issues” cited in the message were a reference to the Iranian pollution allegations and the conclusion of related procedures.

But a far bigger issue is the fate of the biggest single tranche of Iranian foreign cash locked up overseas. As a result of US sanctions, that money sits, frozen, in South Korean banks. Many analysts have suggested the ship seizure was a ploy to initiate movement on this issue.

And there is a yet broader international dimension.

Multilateral negotiations are now underway in Vienna over a return to the 2015 Joint Comprehensive Plan of Action – the deal that halted Iran’s nuclear program and lifted sanctions. That was nixed by the Donald Trump administration in 2018, but has been revived under the Joe Biden administration.

Those negotiations include working groups looking at the possibility of lifting sanctions.  Though South Korea is not a party to the discussions, the release of the ship could possibly be a goodwill gesture aimed at the international community.

Finally, Iran’s presidential elections are set for June this year, and President Hassan Rohani may wish to clear pending issues.

Tehran’s Korean dollars

One pending issue is Iranian money stuck in South Korean vaults. While most news reports cite the figure as US$7 billion in two banks, Kim Hyuck, a professor of Persian and Iranian Studies at Seoul’s Hankuk University of Foreign Studies who sits on a bilateral Iran-Korea panel, puts the figure at $9 billion in three banks.

Citing diplomatic sources, Kim told Asia Times that the tranche is the largest single chunk of Iranian money frozen overseas. Broad estimates are that roughly $100 billion of Iranian money is trapped in overseas accounts.

The Iranian money was originally placed in the South Korean accounts to purchase goods from South Korea – primarily electronic goods, steel and cars, and was offset by South Korean purchases of crude oil. This system was ended when the Donald Trump administration nixed the Iranian nuclear deal and imposed new sanctions.

South Korea, as a US ally, had little choice but to comply. No information has been released as to whether any deal was reached on those funds.  

Though Seoul had cautiously suggested releasing $1 billion, this was shot down by Washington. Seoul had sought to release the money into an Iranian-held Swiss bank account, on the understanding that Iran would use it for humanitarian purposes, such as purchasing Covid-19 vaccinations.

But in March, US Secretary of State Antony Blinken told the US House Committee on Foreign Affairs that the US was open to easing any sanctions.

Seoul’s non-independent foreign policy has its critics.

“In my opinion, Seoul has been putting too much emphasis on Washington and Pyongyang, but not a lot of effort put into relations with Tehran,” Kim said.

He noted that President Moon Jae-in had, until the tanker seizure, paid little attention to Iran. He compared Moon’s stance unfavorably with that of ex-Japanese Prime Minister Shinzo Abe, who traveled to Iran and held a high-profile summit with President Rohani last June.