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Geopolitics

South Korea Owes Iran Billions But Won't Cough Up The Cash

While some countries stopped doing business with the Islamic Republic, others keep engaging in commerce but refuse to pay what they owe. What gives?

A bank in Seoul, South Korea
A bank in Seoul, South Korea

LONDON — Pressed by ongoing sanctions, and with the coronavirus complicating matters even more, Iran could use all the money it can get. Little wonder, then, that it is keeping a close eye on South Korea, which owes the Islamic Republic a hefty sum for unpaid oil purchases. There's just one problem: South Korea won't pay up.

The outstanding debt is no trifling matter. Hossein Tanhay, head of Iran-South Korea Trade Chamber, estimates that South Korea owes somewhere in the range of $6.5 and $9 billion. So far, though, it won't honor that debt, and Iran believes that U.S. pressure is to blame.

In response, Iranian lawmakers are considering a ban on South Korean imports until monies are paid. In addition, the Iranian Foreign Ministry is mulling legal action.

The two countries have had several rounds of talks in recent months, but so far the only benefit to Iran has been a shipment of pharmaceutical drugs from South Korea valued at approximately $500,000. Lawmakers from the two countries are due to talk again.

South Korea owes somewhere in the range of $6.5 and $9 billion.

On July 30, a member of the parliamentary Economic Committee, Mohsen Alizadeh, said that Iran must adopt a "diplomacy of resistance," and a "firm position" against western nations trying to squeeze it from outside. "The fact that Korean officials have said they are ready to negotiate shows we have been successful with our choice of discourse and conduct with that country," he said.

But Alizadeh also said that if South Korea "fails to honor the commitments in its negotiations with Iran," he would propose a priority motion for parliament to vote to ban South Korean imports. "I am certain given the current atmosphere in parliament, that it would be approved," he added.

This is not the first time Iran has threatened to ban such imports, which include sought-after household durables and audiovisual equipment. The country has never, however, followed through on such threats, perhaps because many South Korean goods are imported or smuggled in by gangs and enterprises with ties to regime officials or their relatives. For some people in Iran, this is a huge source of revenue.

Abdolreza Faraji-Rad, a political commentator and former ambassador, told the website Iranian Diplomacy(Diplomasi-e irani) that South Korea is not the only state engaging in such "damaging diplomacy." Japan has engaged in similar behavior, and for the same reason: because of close ties to the United States, he explained. South Korea's harmful conduct "is entirely in line with U.S. pressures," Faraji-Rad said.

South Korea-Iran summit in 2016 — Photo: Yonhap News/Newscom/ZUMA

While Faraji-Rad supports taking legal action against South Korean banks — which apparently are the ones refusing to forward Iran's oil payments — he also believes Iran must avoid further tensions or any deterioration of ties with South Korea. Another Iran-based observer, Fereydoun Majlesi, told the ISNA news agency that South Korea is utterly dependent on Washington because without the United States, "it would be a poorhouse like North Korea."

Iran is not at a dead end.

Majlesi explained that for now, there is little Iran can do against South Korean banks. "These are war conditions and Korea is on the U.S. side," he said. "Even if the issue is raised in international courts, there's no solution because legal affairs have become subservient to politics."

Javan, a newspaper reputedly close to the Revolutionary Guards, recently blamed the government's "careless" relations with Western states and their allies for worsening Iran's financial predicament. Officials working under President Hassan Rouhani prefer to claim that U.S. pressures designed to isolate Iran have effectively failed.

The situation with South Korea, but also Japan, Great Britain and other states, indicate otherwise. Iran's regional relations, both commercial and political, have also deteriorated. Trade has declined, for example, with the United Arab Emirates, which was its number two trading partner in terms of volume after China.

Perhaps the fault does not lie with the Rouhani government, which won't move a finger without the Supreme Leader's assent, but with the overall nature and policies of the Islamic Republic led by Ayatollah Ali Khamenei. And yet, in spite of stagnation in its diplomacy and the economy, the leader insists Iran is not "at a dead end."

Ayatollah Khamenei told South Korean President Park Geun-hye in a meeting in Tehran in May 2016 that ties between the two countries should not be influenced by U.S. "hostility," and he was pleased by Geun-hye's response: that her country had a "favorable" attitude to working with Iran. It turned out not to be true at all.

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Geopolitics

Smaller Allies Matter: Afghanistan Offers Hard Lessons For Ukraine's Future

Despite controversies at home, Nordic countries were heavily involved in the NATO-led war in Afghanistan. As the Ukraine war grinds on, lessons from that conflict are more relevant than ever.

Photo of Finnish Defence Forces in Afghanistan

Finnish Defence Forces in Afghanistan

Johannes Jauhiainen

-Analysis-

HELSINKI — In May 2021, the Taliban took back power in Afghanistan after 20 years of international presence, astronomical sums of development aid and casualties on all warring sides.

As Kabul fell, a chaotic evacuation prompted comparisons to the fall of Saigon — and most of the attention was on the U.S., which had led the original war to unseat the Taliban after 9/11 and remained by far the largest foreign force on the ground. Yet, the fall of Kabul was also a tumultuous and troubling experience for a number of other smaller foreign countries who had been presented for years in Afghanistan.

In an interview at the time, Antti Kaikkonen, the Finnish Minister of Defense, tried to explain what went wrong during the evacuation.

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“Originally we anticipated that the smaller countries would withdraw before the Americans. Then it became clear that getting people to the airport had become more difficult," Kaikkonen said. "So we decided last night to bring home our last soldiers who were helping with the evacuation.”

During the 20-year-long Afghan war, the foreign troop presence included many countries:Finland committed around 2,500 soldiers,Sweden 8,000,Denmark 12,000 and Norway 9,000. And in the nearly two years since the end of the war, Finland,Belgium and theNetherlands have commissioned investigations into their engagements in Afghanistan.

As the number of fragile or failed states around the world increases, it’s important to understand how to best organize international development aid and the security of such countries. Twenty years of international engagement in Afghanistan offers valuable lessons.

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