South Korean companies will be able to settle accounts with their Iranian counterparts in the euro currency instead of the local won from as early as September, allowing more convenient monetary transaction with the Middle East country whose economy offers a wide range of business opportunities after international sanctions were lifted earlier this year.

The euro-based payment system is expected to pave the way for Korean businesses to speed up $45.6 billion worth bilateral projects that have been sealed in May during President Park Geun-hye’s visit to Iran.

According to multiple sources from the financial industry on Sunday, the United States government has indicated it would condone South Korean companies to make payment in euro, a currency largely favored by businesses in the Middle East country.

Korean companies had been under compliance of U.S.-led sanctions on Iran for its nuclear weapons activity. Seoul still needs to confer with Washington in the scope of reviving trade and launching new business ventures amid incremental easing sanctions according the compliance in the landmark deal Tehran reached with major global powers.

Upon green light from Washington, Korea will start trial run in the new payment system as early as next month before full-fledged service. The euro-based payment system allows Korean financial institutions to make monetary transactions in euro via European banks as intermediaries. Under the system, when Korean companies would send money to European banks that would exchange won into euro before transferring the money to Iranian banks.

So far, Korean businesses in industries including construction, shipbuilding, and automobile, have received payment in won via accounts named under Iran Central Bank managed by Woori Bank and Industrial Bank of Korea. Likewise, Iranian companies promoted trade with their Korean counterparts by receiving payment from Iran Central Bank. There have been no actual money transfers between Woori Bank and IBK and Iran Central Bank.

The euro-based payment system is expected to accelerate $45.6 billion worth project deals that have been provisionally signed between Korea and Iran in May.

Korean shipbuilders have already signed 3 trillion won ($2.7 billion) worth memorandum of understanding with Iran while state utility firms Korea Gas Corporation and Korea Electric Power Corporation are each engaged in multi-billion-dollar energy projects. Six construction firms including Hyundai Engineering & Construction Co. have also been selected as the preferred bidder for an order for 2.3 trillion won worth hospital construction project last month.

Korean policy institutions are also moving swiftly to benefit from the Iranian boon. The Export-Import Bank of Korea has introduced a $15 billion financial package support for local businesses. It is also in last-minute talks with the Iran Central Bank in signing a financing deal to support exports.

The Korea Trade Insurance Corporation has also sent a draft of a contract to Iran that includes 5 billion euro worth export financing support. The corporation expects the contract to go through in September at the earliest if the euro-based payment system launches on time.

Iran, which is a major trade partner with Europe, has long preferred payments to be made in euro. However, this has been impossible for Korean firms when promoting trade with their Iranian counterparts as they must first be converted into dollars which could go against U.S. local law. Korean firms have long been campaigning for euro-based payment system to expand their trade with Iran.

By Cho Si-young and Ko Jae-man

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