Iran has seized a South Korean tanker in the Persian Gulf, a statement issued at noon on Monday [January 4] said. Tehran is currently in talks over funds blocked by South Korean banks because of United States sanctions imposed on Iran.

The Iranian statement, from the Revolutionary Guards navy, said the vessel had been detained due to “repeated violations of environmental protocols” at sea and that the crew including Koreans, Indonesians, Vietnamese and Burmese were detained.

South Korea condemned the seizure, demanding the immediate release of the ship and its crew. The country's military announced the dispatch of an anti-piracy unit to the Strait of Hormuz. The operator of the tanker, DM Shipping in a statement said the vessel was in international waters when it was seized.

Hours before the Iranian announcement, the Associated Press reported loss of contact with the tanker MT Hankuk Chemi, with its last location on Sunday evening near Iran’s port of Bandar Abbas. The agency said that the tanker, with a South Korean flag, was sailing from Saudi Arabia to the United Arab Emirates port of Fujairah.

Iran said the vessel was carrying 7,200 tons of ethanol and heading from Bandar Jubail, Saudi Arabia, to South Korea, had been seized at the request of Iran’s Port and Navigation Organization Monday morning, and was taken to Bandar Abbas.

United States third-party sanctions, imposed after it withdrew from Iran’s 2015 nuclear deal with world powers, threatened retaliation for any entities dealing with Iran.  South Korea, which had been a major buyer of Iranian oil, effectively froze funds owed to Iran.

On Sunday, Hossein Tanhaee, head of the Iran-Korea Chamber of Commerce, said negotiations with Korea over unblocking $8.5 billion were underway, but that the Koreans had “not yet initiated action to send goods or free the funds.” Tanhaee expressed doubts over South Korea’s readiness to cooperate and said that ideas for settling the issue had been suggested to vice-President Es’haq Jahangiri.

Tehran and Seoul have looked at options for Iran receiving humanitarian aid in lieu of its blocked funds, but except a small shipment of medicine, there has been no major breakthrough during President Donald Trump’s administration. The seizure of the Korean tanker happened amid regional tension partly triggered by the first anniversary of Iranian General Qasem Soleimani’s killing last January in a US air strike in Baghdad.