Lesson Of An Iran Sanctions Saga in Seoul By Claudia Rosett
http://www.forbes.com/sites/claudiarosett/2015/03/24/lesson-of-an-iran-sanctions-saga-in-seoul/
SEOUL — If international sanctions on Iran are lifted pronto — a condition Iran is demanding as part of any nuclear deal — how hard might it be to reimpose them, in the likely event that Iran cheats? For a glimpse of just how tough it could be, take the case of Iran’s Bank Mellat, headquartered in Tehran, but with a branch in Seoul — where, during a recent trip to South Korea, I dropped by for a look.
Occupying spacious quarters on the 13th and 14th floors of a high-rise office building in Seoul’s busy Gangnam district, this branch of Bank Mellat appeared to have no customers on the premises. That was no surprise, because for several years now, Bank Mellat in Seoul has been under sanctions by the U.S., United Nations and the South Korean government.
But Bank Mellat’s branch in Seoul is not actually closed. When I pressed the button on the front door intercom, someone buzzed me in. The lights were on. The marble floor was polished. On a long curved front counter, a sign advertised advice on letters of credit. Seated behind the desk, under portraits of Iran’s Supreme Leader Ayatollah Ali Khamenei and his predecessor, the late Ayatollah Ruhollah Khomeini, were two South Korean women. They greeted me in English, listened to my request for an interview, first told me no, then told me maybe, then ushered me into a conference room while they disappeared down the hall to summon a senior bank official.
The conference room was decorated with gold-framed certificates, written in English, naming Bank Mellat the Bank of the Year for Iran, for the years 2000 and 2002. In a brown wood frame there was also a statement of Bank Mellat’s “Quality Policy,” dated Sept. 15, 2003, and promising among other things “To develop through ongoing efficiency the success of our customers and of our Branch.”
There was time to reflect on how that had since turned out, including the dogged effort it took for the U.S. to persuade South Korea to impose sanctions on this branch of Bank Mellat. The highlights described in this article are gleaned from U.S. State Department cables posted by Wikileaks, plus press coverage, United Nations documents and U.S. Treasury designations and press releases.
Basically, U.S. allegations, warnings and diplomatic demarches, coupled with U.S. and U.N. sanctions, piled up for more than three years before South Korea’s government — the authority with jurisdiction — finally blacklisted Bank Mellat’s branch in Seoul. During that time, South Korea was benefiting from billions of dollars worth of business every year with Iran, buying oil and providing goods and services such as construction. Many of the related transactions flowed through Bank Mellat in Seoul. Many of these dealings were surely legitimate, but some, according to the U.S. government, were not.
In August, 2007, the State Department dispatched a cable to the U.S. embassy in Seoul, asking that the South Korean government be informed of serious U.S. concerns “about possible Iranian financial activities in your country, especially insofar as Seoul’s branch of Bank Mellat is concerned.”
South Korea responded by providing U.S. authorities with a 46-page report that gave Bank Mellat a clean bill of health. Treasury’s then-under secretary for terrorism and financial intelligence, Stuart Levey, traveled to Seoul to stress U.S. concerns. South Korea agreed to continue investigating the Seoul branch of Bank Mellat.
By early 2008, the U.S. was pushing harder for Seoul to take action. In a cable dated March 20, State asked its embassy in Seoul to tell the South Korean government that “Bank Mellat has facilitated the movement of millions of dollars for Iran’s nuclear program since at least 2003.”
Four days later, State followed up with a cable asking its embassy to “Inform Seoul that the U.S. views Bank Mellat’s Seoul branch as a key node for facilitation of proliferation-related activities.” That same cable included a list of U.S. allegations regarding specific transactions of Bank Mellat in Seoul. For example, State alleged that in 2007 Bank Mellat in Seoul had served as an intermediary for a Hong Kong company that was “almost certainly a front company for Tanchon Bank (North Korea’s primary weapons trade bank)” and that Bank Mellat in Seoul had played a role in financial transactions related to Iran’s ballistic missile program, purchase of a surface-to-air missile system, and illicit nuclear procurement networks in China.
South Korean officials thanked the U.S. for this demarche, and reaffirmed their commitment to investigating Bank Mellat’s branch in Seoul.
A few months later, in June, 2008, U.S. authorities, in turn, thanked Seoul, and urged them, consistent with U.N. sanctions on Iran, to “establish reporting and/or licensing requirements for all transactions executed by Bank Mellat Seoul.” The U.S. also suggested that South Korea, “once its investigation is complete, explore options for closing Bank Mellat Seoul.”
Two more years went by, during which the U.S. continued to prod South Korea to take action. In June, 2010 the U.N. Security Council passed its fourth sanctions resolution on Iran. This resolution included, in an annex, the statement that “Over the last seven years, Bank Mellat has facilitated hundreds of millions of dollars in transactions for Iranian nuclear, missile and defense entities.”
Even then, it took three more months, and a visit from the State Department’s then-serving special advisor for nonproliferation and arms control, Robert Einhorn, before South Korea in Sept. 2010 worked around to blacklisting Bank Mellat’s branch in Seoul.
That was what it took to persuade South Korea, a democratic country closely allied with the U.S., to cooperate substantially with the U.S. on sanctions that Washington had been arguing for more than three years were a matter of urgency. And it was a breeze, compared to the mission-pretty-much-impossible of persuading countries such as Russia or China to fully get with the program.
What’s the current status of Bank Mellat’s branch in Seoul? This was explained to me during my visit there by a senior official of the bank, who eventually turned up to talk with the American reporter waiting in his conference room. He gave me a brief interview, asking that he not be identified by name. He said that under South Korean sanctions since 2010, Bank Mellat in Seoul is not allowed to engage in foreign currency transactions without specific approval from the South Korean government. Other banks are handling the business now being done between South Korea and Iran under the umbrella of what is supposed to be limited and temporary sanctions relief for the duration of the Iran nuclear talks — for which the twice-extended deadline is now June 30, 2015.
Bank Mellat’s staff has dwindled, he said, from some 40 people prior to sanctions, to 12. That includes 11 South Koreans and one Iranian who was deputy manager before the sanctions, and holds the same job today. The bank has about $45 million worth of capital held perforce in South Korean won, and does no lending, according to the senior official who spoke with me. Any activity by the bank, he said, is subject to frequent and “very serious monitoring” by South Korean authorities.
He would like to see sanctions lifted, so Bank Mellat in Seoul will be able to resume normal operations: “That’s why this branch in being maintained.” In Europe and the U.K., Bank Mellat has been succeeding step-by-step in challenging sanctions in the courts. But what lies ahead for the branch in Seoul, he said, depends on the results of the Iran nuclear talks.
What lies in the not-so-distant past is a lesson for U.S policy makers: Even when the U.S. is convinced that Iran is immersed in sanctions-violating proliferation traffic, it can take years to persuade even a close ally such as South Korea to target players already on the U.S. blacklist.
Later this week, Secretary of State John Kerry returns with his team to the nuclear bargaining table in Switzerland. Iran wants swift lifting of sanctions. U.S. negotiators have been talking about a deal structured (according to complex and secret models) to keep Iran just one year away from a “breakout” to nuclear weapons. These are terms and timetables on which it’s all too likely that Iran could cheat its way to the bomb while American diplomats were still delivering their next demarche.
Ms. Rosett is journalist-in-residence with the Foundation for Defense of Democracies, and heads its Investigative Reporting Project.
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