The news of a grand settlement of the Iranian nuclear issue from Lausanne has vindicated the importance and efficacy of an international economic sanction targeting financial institutions. Once the operation of the financial institutions of Iran and those dealing with Iran was restricted, trade flow was slowly disrupted. In terms of achieving the stated goal, the U.N.-authorized and U.S.-led economic sanction of 2010 knew where the Achilles heel was in a modern trading nation. An intensive international s
anction has evidently forced Tehran to consider other options.
Now, a downside of an economic sanction is that sometimes it can cause a sanctioning state to hemorrhage as well due to the increasingly interdependent nature of the global economy.
Korea can present its own firsthand account here. The closure of the Seoul branch office of Bank Mellat in 2010, in tandem with international sanctions, was a painful decision for Korean companies that had relied upon the Iranian bank for the settlement of their business transactions with Iranian counterparts. Korea’s robust exports to and imports from Iran were all cleared through the bank. So its closure has since choked bilateral trade and the vacuum left by Korea’s departure has been largely filled by Chinese exports and construction companies.
As the news of the grand settlement in Lausanne spreads, hopes are high among traders and business people in Korea that a restored economic relationship with this country of 80 million people will open up a new market of goods and services in the Middle East. Before the sanction, Iran was Korea’s fourth largest provider of crude oil, with annual imports worth $7 billion.
Korea’s export of manufactured goods, mostly electronic products, household appliances, and automobiles, reached $4.5 billion annually. That market is now coming back. On top of that, the lifting of the economic sanction would mean more construction projects in the region and a further fall of oil prices. Not bad news for Korean companies.
The emerging thaw in Iran in fact fits nicely with the “second Middle East boom,” which has been the talk of the town recently as the region becomes a hallmark of the successful economic diplomacy of the current administration. The elimination of the biggest uncertainty in the region is certainly a tailwind at the right timing.
In retrospect, Tehran was an iconic symbol of the first Middle East boom in the 1970s: now bustling Tehran Boulevard in the Gangnam district is the only street in Seoul that carries the name of a foreign city. Iran reciprocated by naming one the main arteries of Tehran as “Seoul Street.” “Korea Plaza” and “Seoul Park” were also opened in Tehran in 2002 and 2003, respectively.
Korean dramas have been very popular in the country. The TV series “Jewel in the Palace (Daejanggeum)” still remains one of the biggest hits in Iran, and just two weeks ago the Iranian embassy in Seoul invited the main actress of the drama to its national reception of Nowruz New Year celebration ― the first of its kind.
Tehran’s coming back to the global economic regime is arguably yet another catalyst for the recovery of the global economy. With the lifting of the economic sanction, Korean businesses are also in a sweet dream of new opportunities in the region. The pieces are falling into place one-by-one to herald a second Middle East boom.
By Lee Jae-min
Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.
