Thursday, October 7, 2010


As they say, business is business;  and it is hard to imagine any business being conducted without making sure that every participant has his/her own convenient set of loopholes.  This morning’s Financial Times provided a report from Christian Oliver and Song Jung-a in Seoul that illustrated this point very nicely in the context of our current effort to bring Iran to heel through economic sanctions:

South Korea has appointed two state-run banks to finance trade with Iran and revive lucrative business ties that collapsed because of sanctions announced in September.

The US has pressured Seoul to help cut Iran out of international markets, but South Korea is seeking ways to protect its $10bn annual trade with the Islamic Republic.

It has now been revealed that South Korea reached a financing agreement with the Iranian central bank, which Washington has sought to sanction, just one week after Seoul had won praise from the US for announcing independent sanctions designed to rein in cross-border financing with Iran.

Seoul says that, from this month, Woori bank and the Industrial Bank of Korea can finance legitimate trade with Iran in sectors unaffected by sanctions.

“We are closing the door on Iran, but leaving a window open,” said Ernst Lee, a spokesman for South Korea’s regulators.

Under the scheme, the Iranian central bank will deposit proceeds from oil sales in South Korea at Woori and IBK. The funds will be used to enure payments for South Korean exporters, who had been retreating from Iran since July ahead of the imposition of September’s sanctions.

To the credit of the Woori Bank, they are at least willing to admit that they recognize a loophole when they see one:

“Iran’s central bank is not the target of sanctions, so transactions through the bank are legal,” Kim Jong-woo, an official at Woori bank told the Financial Times. “We do not worry about any possible sanctions by the US against us.”

Nevertheless, this illustrates nicely just how fragile the instruments of economic warfare can be;  and this comes off as little more than a South Korean bank demonstrating that it can play the loophole game as well as any American business.  Still playing that game against an ally on which the country remains so dependent takes more than a little chutzpah, and that is enough for the Woori Bank to win the Chutzpah of the Week award!

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