|Iran oil ban will have devastating impact on South Korean businesses||
If Iran’s import ban on Korea happens, the move is expected to deal a devastating blow to small and medium enterprises (SMEs) that rely heavily on exports to Iran.
The Iranian government said it may halt all imports of South Korean goods in response to Seoul’s suspension of all Iranian crude oil imports as of July 1.
Those imports are scheduled to be stopped as a result of a European Union ban on insurance of ships transporting Iranian crude oil.
A diplomat from the Iranian embassy in Seoul told the Hankyoreh on June 26 that the South Korean government’s recent decision to halt Iranian crude imports “has posed a serious obstacle to Iranian exports by South Korean businesses.”
“Iran may well decide to suspend imports for all items produced in South Korea,” the diplomat added.
The Iranian ambassador to South Korea Ahmad Masumifar previously said Tehran would take “reciprocal” measures if Seoul suspended crude imports, but this is the first reference to what those measures might actually entail.
South Korean businesses have seen a steady rise in their exports to Iran, from around US$4 billion in 2009 to US$4.6 billion in 2010 and US$6 billion in 2011. Around 2,700 SMES export to the country. Of those, roughly a quarter depend on Iran for upwards of 50 percent of their exports. They stand to take a direct hit if Tehran shuts off South Korean imports.
The Korea Federation of Small and Medium Business (KBIZ) conducted a survey of 72 small exporting businesses back in Aug. 2010, when sanctions were established against Iran. The study found that three out of ten saw their transactions halted, while six out of ten suffered damages.
Plans are currently under examination for the government to stand surety for vessels to help resume crude imports amid a European Union suspension of all insurance for ships transporting Iranian crude. The National Diet of Japan recently passed a special law guaranteeing up to US$7.6 billion in liability for damages in the event of an accident befalling an oil tanker carrying Iranian crude oil imports.
The South Korean Ministry of Knowledge Economy (MKE) expressed displeasure over the government guarantee. “Given the current financial situation, there needs to be serious discussions on the government assuming most of the insurance burden, which is more than $7 billion,” it said.
An official there said the MKE plans to consider measures for autonomous export management by the private sector, and to take steps to support export transitions for companies that are heavily dependent on exports to Iran.
A June 21 KBIZ survey of 89 SMEs exporting to Iran found 85.1 percent calling for the continuation of the present won-denominated transaction system through government guarantees for crude oil transport vessels. 25.3 percent called for support in developing alternative markets, while 24.1 percent asked for greater policy fund support.
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|Last Updated on 29 June 2012 17:28|