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Iran challenges Biden with South Korea tanker seizure

US Sanctions Spark Game Of Brinkmanship That Risks Spiraling Out Of Control

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Iranian Revolutionary Guard boats escort a South Korea-flagged tanker. Iran is trying to strong-arm Joe Biden into returning to the negotiation table.   © AP

Iran's mounting frustrations with U.S. economic sanctions could prod the nation into lashing out in ever more dangerous ways, as indicated by the recent seizure of a South Korean tanker by Iran's Islamic Revolutionary Guard.

When the tanker was seized in waters off Oman, near the Strait of Hormuz, Iran cited pollution concerns. The ship, which was carrying methanol from Saudi Arabia to the United Arab Emirates, and its 20 crew are being held in the port city of Bandar Abbas.

The Strait of Hormuz links the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is a geopolitical choke point -- 33 km at its narrowest -- through which oil tankers from numerous ports in the Persian Gulf must pass. Many of these tankers make their way to China, Japan and other Asian countries.

Every day, ships carrying 17 million barrels of oil, nearly 20% of the world's daily oil consumption, pass through the strait.

In the past several years, there have been a number of attacks against vessels sailing through the region. Since 2019, Japanese shipping companies Nippon Yusen and Mitsui O.S.K. Lines have been requiring their tankers to take additional security measures while navigating through the region.

There is good reason to believe Tehran deliberately targeted a South Korean ship.

The action appears to be an attempt by Tehran to regain control of $7 billion of frozen financial assets in South Korea. In response to U.S. sanctions against Iran, Seoul froze Iranian assets at South Korean financial institutions. For more than two years, Iran and South Korea have been at loggerheads over the funds, which had come in the form of payments for its oil and other exports.

The U.S. reimposed sanctions on Iran in 2018, after then President Donald Trump withdrew Washington from a nuclear deal between Iran and six major powers.

The Trump administration's sanctions have blacklisted virtually all Iranian financial institutions. In addition, non-Iranian foreign companies that had transactions with Iran became subject to secondary sanctions. As a result, Iran's financial sector has been cut off from the international financial system.

South Korea is not alone in Asia in heeding the U.S. sanctions. Japan, which used to buy a lot of oil from Iran, can no longer transfer funds from its domestic bank accounts to Iranian banks to pay for oil imports from the country.

Several factors explain why Iran targeted South Korea rather than Japan.

Iran has far more funds frozen in South Korea than in Japan, where $1.5 billion of its money has been made inaccessible, according to Reuters.

Another matter rankles Iran. South Korea had been the largest buyer of Iranian condensate, purchasing as much as 300,000 barrels a day of the high-value and ultralight crude. The nation ceased importing condensate from Iran when the U.S. introduced sanctions on purchasers of Iranian oil in 2018, but payments for past imports have yet to be made, according to industry sources.

Meanwhile, Japan took steps to make it legally possible to pay for purchases from the Middle East country, according to a Japanese government official. But "South Korea seems to have failed to take such measures in time," the official said.

As for other Asian nations, China is believed to have bought more oil from Iran than South Korea. But the Iranian Foreign Ministry spokesman has said, "No [Iranian] money is blocked in China."

And India has taken multiple measures, including the establishment of a barter system so it can trade made-in-India products for Iranian oil.

All these factors have focused Iran's attention on the $7 billion of its assets frozen in South Korea.

Cut off from the international financial system, Iran is struggling to secure the products its population needs. In particular, it is facing a serious shortage of medical supplies amid the coronavirus pandemic.

It is growing more desperate. The South Korean tanker was seized almost exactly a year after Qasem Soleimani -- the head of the Revolutionary Guard's Quds Force, an elite military unit -- was assassinated by the U.S.

It has also resumed enriching uranium to 20% purity, which the deal Trump pulled out of prohibits. This has raised concerns that Iran might start a drive to develop nuclear weapons.

The situation is growing more combustible as Joe Biden takes over from Trump as U.S. president. Biden, who was vice president when the nuclear deal was reached, has indicated his willingness to return the U.S. to the pact -- on condition of Iran's compliance with the terms.

Iran's actions, however, seem tailor-made to hamper Biden in this regard.

Here, too, Iran is acting by design.

"For Iran, it is important to demonstrate its strong determination to do whatever it needs to do, no matter who the U.S. president is," Keio University professor Koichiro Tanaka said. On the other side, because Biden must govern a deeply divided U.S., Tanaka said, "the Iranian nuclear issue will not take high priority."

Therefore, Iran's seizure of the South Korean vessel is "aimed at pressuring the Biden administration to quickly move back toward the nuclear deal," Tanaka said.

But Tehran's provocation risks a negative spiral: It could trigger a hawkish policy stance in Washington, which could then induce hard-line responses from Iran. Tanaka summed up the move by Iranian President Hassan Rouhani, whose term expires this summer, as a "dangerous gamble."