South Korea to become second Asian nation to buy Iran oil

South Korea is set to become the second Asian nation to make a payment to Iran for crude oil imports under an interim nuclear deal that has provided limited sanctions relief, banking sources said on Wednesday.

Under a November 24 agreement with six major powers, Iran won access to US$4.2 billion of its oil revenues frozen abroad by eight money-transfer schedules through July if it carried out its part of the deal to curb its nuclear programme.

Japan became the first of Iran’s oil buyers to make a payment to Iran under the eased sanctions earlier this month.

It was not clear the amount to be transferred but the Iranian central bank was holding up to $5.6bn in two won-denominated accounts, one at Woori Bank and the other at Industrial Bank of Korea as of late 2013, according to one of the sources.

A second source who confirmed the money transfer added the payment would be made by the two Korean banks next month - one part on early March and the other later in the month.

The sources declined to be named due to the sensitivity of the issue.

State-owned Woori Bank and Industrial Bank of Korea declined to comment on the money transfer.

According to the November agreement between Tehran and the five powers, the second and third payment schedules are March 1 for $450 million and March 7 for $550m.

Bank of Korea and South Korean finance ministry officials contacted by Reuters said no decision had been made about money transfers to Iran.

Japan became the first of Iran’s oil buyers to make a payment for crude imports under the interim nuclear deal, after the West eased a year-long stranglehold on revenues that has crippled the Iranian economy. One source confirmed the Japanese payment was $550m.

Until the interim deal, Iran’s importers had been steadily reducing purchases to avoid falling foul of US and European Union sanctions.

The four Asian buyers - China, India, Japan and South Korea - together cut oil imports from Iran by 15 percent on the year to an average of 935,862 barrels per day (bpd) in 2013, government and industry data showed.

An agreement between Iran and six world powers in November allows the Opec member to keep exports at the current reduced levels of about 1 million bpd, and opens a door for lifting shipments later.

Shipments to Tehran’s biggest oil customers are expected to recover only slightly this year, even after a deal with the West eases some sanctions.