TEHRAN – officials from the United States and South Korea are holding talks over unfreezing Iranian funds held in South Korean banks, according to a South Korean daily.

The talks are focused on releasing the $7 billion Iranian funds that have long been blocked in South Korean banks due to U.S. sanctions on Iran. The funds are oil revenues dating back to the period prior to the re-imposition of U.S. sanctions on Iran in May 2018.

Citing diplomatic and government sources, The Korea Economic Daily said, “Korean and U.S. government officials are involved in working-level discussions under Washington’s leadership to unfreeze the Iranian funds.”

The newspaper said the funds, if released, would only be used for public and humanitarian purposes such as UN dues and COVID-19 vaccines.

“If all goes to plan, we expect our strained relationship with Iran to improve significantly,” said a Seoul government official.

If talks turn out to be successful, the frozen money will be allowed to be transferred to Iranian bank branches in neighboring Middle Eastern countries, not directly to Iran, to monitor the flow and use of the funds, sources said.

The Korean newspaper also pointed to media speculation over the concessions that Iran is expected to make in exchange for getting its money unfrozen. It said that media reports alleged that Iran would release U.S. prisoners and limit uranium enrichment levels to 60% in return. These speculations have so far not been confirmed by officials.

The frozen Iranian funds have been the biggest obstacle to improvement in Tehran-Seoul relations. They have also been a source of tensions between the two countries.

South Korea seems to be willing to improve its relations with Iran by releasing its funds. “Analysts said if the $7 billion Iranian funds are released, it would significantly improve Seoul’s relations with Tehran, an energy and military power in the Middle East,” the Korean newspaper wrote.

“There is nothing South Korea can gain from becoming an enemy of Iran,” said Sung Il-kwang, a Korea University professor. “Korea will benefit from gaining access to Iran’s huge market.”