Seoul squeezed between US and Iran

South Korea fears disruption of its oil supply if it gives in to demand for tougher sanctions.

SK Energy Co.'s oil refinery facilities stand in Ulsan, South Korea, on Wednesday, Feb. 25, 2009. Iraq, holder of the world's third largest crude-oil reserves, has resumed exports to SK Energy Co. after resolving a dispute concerning South Korea's oil agreement with the Kurdistan regional government. Photographer: Seokyong Lee/Bloomberg News
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BEIJING // Efforts to enforce UN resolutions demanding that Iran stop uranium enrichment pose quandaries for many countries with ties to the Islamic Republic. For South Korea, the dilemma is especially difficult. On the one hand, trade between South Korea and Iran amounts to $10 billion (Dh3.7bn) annually, making it one of Seoul's leading trading partners in the Middle East. On the other hand, South Korea's most important defence ally, the US, wants it to impose sanctions against Tehran beyond those required by the UN Security Council. Either way, Seoul stands to get pinched.

"South Korea may be in the realm of bad choices, without good policy choices here," said Daniel Pinkston, a nonproliferation expert for the International Crisis Group. Iran's ambassador to Seoul warned on Saturday that South Korea will regret it if it follows the US in applying stricter sanctions on Iran. "If restrictions are going to be taken by the other party (South Korea), we are not going to sit idle," Mohammad Reza Bakhtiari told South Korea's JoongAng Ilbo newspaper. Seoul's response to Washington's request will be a barometer of the future of South Korean-Iranian relations, he said.

It is not known exactly what measures the Obama administration has asked Seoul to take against Iran. According to news reports, however, it has asked South Korean authorities to close the Seoul branch of Bank Mellat, the only Iranian bank in South Korea, citing its involvement in Iranian nuclear activities. Speculation that the South Korean government will join in tougher sanctions against Tehran has left South Korean firms fretting. They are keen to invest in Iran's petrochemical and construction sectors. The latter already amounts to several billion dollars each year.

What South Korea fears most, however, is that Iran will retaliate by restricting its oil supplies, said Kim Yong-hyun, a security expert at Dongguk University in Seoul. South Korea imports 100 per cent of its crude oil from abroad, including some 10 per cent from Iran. If South Korea joins the sanction, Iran might retaliate by halting its oil sales, Mr Kim said. The situation will worsen if other nations with close ties to Iran follow suit, he said.

The country's dependence on Middle Eastern crude oil stood at 84.2 per cent in the first quarter 2010, the state-run Korea National Oil Corporation (KNOC) said. Some see the president Lee Myung-bak's efforts to draw closer to Washington as part of the problem. Historically, South Korea has struck a delicate balance in its ties with Iran. However, Mr Lee's pro-US position has put South Korea's economy, the world's 15th-largest, in unusually perilous ground, South Korea's anti-government Hankyoreh newspaper said.

"This is where the interests of the US and South Korea differ. As a US ally, it's difficult for South Korea to be exempted from joining the sanction when Japan is already in," Mr Kim said, adding that the only way out of the quandary is to explain to both Tehran and Washington its unusual position. "South Korea should explain to Iran the special alliance Seoul has with Washington in their deterrence against North Korea, while it should also make Washington understand its economic dilemma with Iran," Mr Kim advised.

Some analysts suggested that given the danger to the Middle East presented by nuclear weapons in Iranian hands, Seoul had little choice. "As an ally to the US, I understand South Korea is in a dilemma," said Wang Fan, the director of institute of international relations at China Foreign Affairs University under the Foreign Ministry, calling on South Korea to act "according to its national interest."

Mr Pinkston, of the International Crisis Group, believes South Korea's national interest lies in joining the US in levying tougher sanctions. "It's costly in the short run, but it's South Korea's real interest in the long run if Iran changes its nuclear proliferation behaviour. It's pretty short-sighted to continue business as usual with Iran, whose policy is very destabilising in the Middle East and which has had long ongoing co-operation with North Korea," he said.

Mr Pinkston recognised, however, that this was easier said than done for Seoul. "South Korea has to make a decision," he said. "It's unfortunate. But that's just the unpleasant reality of the international security."