The United States will not release any of the Iranian funds frozen in South Korean banks under the US sanctions until Tehran complies with the 2015 nuclear deal, raising concern that the standoff between Seoul and Tehran over the locked assets may be prolonged.

US Secretary of State Antony Blinken made the remark Wednesday (US time) at a House Foreign Affairs Committee hearing, when he was asked about recent reports that Washington had agreed to release some of the Iranian money held in Korea.

“If Iran comes back into compliance with its obligations under the nuclear agreement, we would do the same thing,” Blinken told the committee. “That would involve -- if it came to that, if Iran made good on its obligations -- sanctions relief pursuant to the agreement.

“But unless and until Iran comes back into compliance, they won’t be getting that relief and the report you referred to is simply incorrect,” he said, denying any plans to unfreeze the Iranian funds at this time. 

Tehran is demanding that Seoul unlock about $7 billion in revenue from oil sales that has been tied up in Korean banks since 2019 due to sanctions reimposed on Iran by the Donald Trump administration, after Washington’s unilateral decision to withdraw from the 2015 nuclear accord.

The new Biden administration said it is open to diplomacy with Iran, but made clear that Tehran needs to first come back into full compliance with the 2015 deal, known as the Joint Comprehensive Plan of Action, in order for any sanctions to be lifted. Tehran wants sanctions to be eased first, before it accepts Biden’s offer to negotiate.

Seoul is in talks with Washington on ways to release the funds without breaching the sanctions, including using some of the money to purchase humanitarian, medical and other supplies or to pay off Tehran’s UN membership fees, which are in arrears.

But releasing funds in any form requires consultations with the US first, Seoul emphasized, despite Tehran’s media reports saying Iran and Korea had sealed an agreement.

South Korea’s Foreign Ministry on Thursday said it will continue to consult with related countries, including the US, about unfreezing the assets.

The growing standoff on the locked funds comes as Tehran is withholding the release of a Korean-flagged vessel it seized in January. Tehran argues that it captured the ship and apprehended its sailors due to a breach of its environmental pollution laws, but there is ongoing speculation that it was done to pressure Seoul to release the funds.

Early this month Iran agreed to free the crew of the oil tanker MT Hankuk Chemi, but decided to keep the vessel and its captain, who is to remain in Iranian custody until the investigation is completed.

As of Thursday, eight of the 20 detained sailors -- including two Koreans -- were released and returned home. It is still uncertain when the remaining sailors will be able to leave Iran.

The ministry said it will work towards the prompt release of the vessels and the sailors.

By Ahn Sung-mi (sahn@heraldcorp.com)