SEOUL: South Korea plans to announce sanctions on Iran later Wednesday, a foreign ministry official said, as a news report said the local branch of an Iranian bank was likely to face a two-month suspension.

"We plan to announce the sanctions this afternoon," the official told AFP on condition of anonymity.

Yonhap news agency said Seoul was likely to impose a two-month suspension on the local branch of Bank Mellat, which is accused of facilitating millions of dollars in transactions for Iran`s nuclear, missile and defence entities.

South Korea must walk a fine line between Iran, its largest trading partner in the Middle East, and its key ally the United States, which has been leading the drive to enforce United Nations sanctions against Tehran over its nuclear programme.

Robert Einhorn, a US State Department official overseeing sanctions on North Korea and Iran, visited South Korea in early August to seek cooperation in punishing Iran for its alleged nuclear weapons programme.
The Seoul branch office of Bank Mellat, one of Iran`s biggest lenders, is its only operation outside the Middle East and Europe.

South Korean authorities have been considering possible sanctions against the branch for allegedly unauthorised transactions with blacklisted Iranian companies.

A suspension of its business would likely affect more than 2,000 South Korean companies involved in trade with Iran, most of which is settled through Bank Mellat`s Seoul branch.

Iran`s trade with South Korea surged more than 50 percent year-on-year to 7.4 billion dollars in the first seven months of this year -- mainly due to increased oil exports to the Asian nation.

Tehran accounts for 10 percent of South Korea`s annual oil imports.
Iran maintains that its nuclear programme is peaceful.

BDST: 9:56 HRS, September 08 2010