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Title The Return of U.S. Sanctions on Iran: Challenges and Prospects for Korea
Author Jae Wook Jung
Date 2019-01-08
File KIEP opinions_no150.pdf 

The United States withdrew a Joint Comprehensive Plan of Action (JCPOA) regarding Iran's nuclear program on May 8, 2018, with Iran and the other participants still staying in the deal. In August 2018, the U.S. sanctions which were lifted as part of the agreement clamped down again on Iran, such as sanctions on trading U.S. dollars, gold, aluminum, and steel, and the Iranian auto industry. On November 5, as the wind-down period ended, the U.S. fully reimposed its sanctions on the shipping, shipbuilding, finance, and energy sectors of Iran, the most important industries for the country. Korea and seven other major oil importers from Iran obtained temporary waivers to continue imports of Iranian oil, albeit with "significant reductions" in the amount of oil they imported. Korea has been a major economic partner of Iran. In 2017, Korea was the top-3 export destination of Iran while Iran was the third largest importer of Korean products in the Middle East. The outlook on the economic relationship between Korea and Iran remains unclear. The six-month cycle of waiver renewal hinders the reengagement of Korean firms in the Iranian economy, especially in energy sectors. The two countries, however, still have a chance to continue and expand their economic relationship. Most of the products traded between the two countries are on the U.S.'s sanction waiver list. Small and medium-sized enterprises in both countries have a particular demand for each other's products and services. To ensure a sustainable economic relationship between the two countries, the three following points on the relationship should be addressed. First of all, mid- and long-term strategies to continue the relationship will be needed. Trade diversification could be enhanced by expanding the trade of non-sanction products, and by reorganizing the current bilateral relationship centered on large firms to one that is more inclusive of small and medium-sized firms. Second, sanctions could have the effect of securing the Iranian market from international competition. Actually, the current sanctions on Iran are hardly new development in the relationship between the two countries, while U.S. sanctions on Iran have been in place since the 1980s. Large European firms which had reentered the Iranian market after the implementation of the JCPOA are leaving Iran again. This time could be an opportunity for others. In the short term, now could be an opportune time to expand private partnerships in the meanwhile, promoting the exchange of entrepreneurs, students, and technicians between the two countries. Third, Korean firms and the government should closely monitor short-term situations in the Iranian economy in addition to the status of sanctions by the U.S. Sanctioned lists are limited. The Iranian economy seems vulnerable to external conditions such as exchange rates and import limitations mainly caused by the recent sanctions and changes in the U.S. position on Iran.