South Korea says talks with US on Iran oil "going smoothly"

"The two countries have agreed to exempt non-oil sectors (from the U.S. sanctions), and negotiations on the remaining issue are going smoothly," Bahk told reporters at a conference in Seoul.

South Korea imported $350 million in Iranian petrochemicals in 2010, while exporting $450 million of its petrochemicals to Iran.

Bahk said South Korea would take measures aimed at cushioning the economic impact from rising oil prices when Dubai crude rises above $130 per barrel.

He did not elaborate, but the comment came in response to a question on whether the government planned to lower import tariffs or domestic sales taxes on oil and oil products to mitigate the impact from high oil prices.

Dubai crude is now quoted at $119.94 per barrel, up about 15 percent since the beginning of the year.

The remarks came after a Japanese newspaper reported on Thursday that Japan was in final talks with Washington on an agreement on cuts in Iranian crude oil imports by a higher-than-expected 20 percent or more a year.

A team of officials from three ministries including the finance ministry were visiting the United States for talks with Washington on details of the proposed import reductions.

Meanwhile, a foreign ministry spokesman told a regular briefing that the two countries were still some distance from a final agreement on specific Iranian crude import cuts.

"There was some consensus made (between South Korea and the United States) over non-crude trade, but we are still discussing crude import issues and need further review before reaching a final agreement," said a Seoul's foreign ministry spokesman at its regular briefing.

"It's inappropriate to discuss specific levels of cuts to crude imports at this stage as we have other issues to review before reaching a deal that complies with U.S. policies."

(Reporting by Lee Shin-hyung; Writing by Yoo Choonsik and Miyoung Kim; Editing by Jonathan Hopfner)