Tehran recently issued a ban on importing domestic appliances from South Korea amid growing tensions between Iran and South Korea. Both countries in recent months have had strong differences, especially concerning Tehran’s frozen assets because of US sanctions. This sudden move has stirred domestic debate with some arguing that the move limits consumer choices. The move is also viewed as Tehran’s attempt to pressure Seoul to release its frozen assets worth approximately more than $7 billion.
Iran’s Supreme Leader Ali Khamenei sent a letter to Iranian President Ebrahim Raisi directing his government to take the necessary steps to ban imports from South Korean consumer electronics giants such as LG and Samsung (without categorically naming these companies). The letter cited pressure from Iranian companies manufacturing electronic appliances to keep South Korean electronics companies out of Iran’s market. In light of this ban, Farhad Tahmasebi, a member of the Parliamentary Committee on Industries and Mines, urged the Iranian government to ensure that the quality of domestic electronics appliances are of comparable standards to foreign imports. Reports indicate that the net value of Iran’s domestic appliances market is between $4.5 billion to $6 billion and Tehran in recent years has refrained from issuing import permits for appliances or products to avoid foreign competition as long as alternatives are available in the Iranian market. The move to ban South Korean electronics appliances can be viewed to be in line with President Raisi’s “self-reliance” strategy. President Raisi has been an advocate of this strategy to lessen Iran’s dependence on foreign imports. Iran had exported oil to South Korea when it was sanction-free and imported key industrial and domestic appliances from Seoul. The Iranian government now alleges that South Korea imported Iranian oil without paying. Alireza Salimi, a lawmaker involved in the recent case regarding frozen Iranian assets said, “It (South Korea) is not a reliable trading partner and it should pay interest on the money it is improperly holding.” Iran’s Foreign Minister Hossein Amir-Abdollahian raised the issue during a phone call with South Korean Foreign Minister Chung Eui-Yong. Abdollahian reportedly said that South Korea’s unwillingness to unfreeze Iranian assets had contributed to the suffering of the Iranian people who were badly hit by Iran’s economic crises, which worsened because of the economic fallout from COVID-19. During the phone call, Foreign Minister Eui-Yong expressed strong concerns over Iran banning the import of South Korean domestic electronics appliances.
Data reveals that bilateral trade between Iran and South Korea has plummeted in the last two years primarily because of US sanctions. Trade reports also indicate that electronics appliances are the main products imported from South Korea in recent years because of consistent Iranian demand. As per recent reports, Iranian domestic electronics appliances companies have pressed for at least a five-year ban on imports to avoid foreign competition. The Head of Iran’s Appliances Sector Union reportedly confirmed that Iran’s domestic appliances market value is approximately $6 billion per year and smuggled home appliances make up around $2.5 billion of the domestic market’s value. There are also domestic concerns that banning South Korean domestic appliances will benefit Chinese commercial interests. Some reports also indicate that Iranian companies which previously assembled LG and Samsung products are now working with Chinese companies. China exports nearly $1.43 billion worth of electronics appliances to Iran and in the absence of South Korean and European products in the Iranian market, Chinese companies possibly can carve out a bigger market share, particularly in the domestic appliances and services sectors.
As mentioned, the unprecedented move to ban South Korean electronics imports indicates Iran’s intent to build pressure on Seoul without taking into consideration the interests of Iranian consumers. Instead of gauging consumer preferences and taking adequate steps to control imports and increase the quality of domestic products, the recent ban merely threatens South Korea, leaving Iranian consumers with fewer choices and creating more demand for smuggled and contraband products. After the imposition of US sanctions, the black market for domestic appliances had boomed, which is likely to see further stimulus after this recent ban. The black market for domestic appliances also indicates the lack of Iranian consumer confidence in domestically produced appliances and the preference for foreign products because of their high quality and longevity.