LONDON - Western government sanctions against Iran suffered a big setback on Wednesday when Britain's top court ruled that the government was wrong to have imposed sanctions on the biggest Iranian private bank over alleged links to Tehran's nuclear program.
The Bank Mellat case and 50 more like it pending at the European Union's General Court have cast a cloud over the future of EU sanctions and alarmed Washington, which relies on European support to throttle Iran's links to the global economy in hopes of getting it to curb its disputed pursuit of nuclear power.
The British Supreme Court decision on Wednesday echoed a January ruling by the EU's General Court, which overturned sanctions imposed in 2010, and paves the way for Bank Mellat to sue Britain for damages.
A bank spokesman told Reuters on Wednesday that it is considering launching a claim against Britain that "could exceed 500 million pounds".
Supreme Court Judge Jonathan Sumption ruled that the British government had been "arbitrary", "irrational" and "disproportionate" to single out Bank Mellat for sanctions.
A British government spokeswoman said it was "disappointed" with the decision and was "considering the judgment and its implications for any future orders (for sanctions)".
Some in diplomatic and legal circles have suggested the EU adopt less targeted sanctions to avoid litigation, but such a course risks threatening commercial interests that governments may not want to give up.
Bank Mellat has long denied allegations that it has aided the nuclear program and argued that it had not been consulted before sanctions were imposed.
Europe and The United States have imposed sanctions against specific Iranian people, state institutions or companies in so far unavailing efforts to persuade Tehran to rein in enrichment of uranium and open up to UN inspectors in exchange for phased relief from the tightening noose of financial isolation.
Western nations believe the Islamic Republic is attempting to develop the means to build atomic bombs, though it says the program is for domestic power generation and medical purposes.
Sanctions have severely affected Iran's ability to export oil, nearly halving crude revenues in 2012 to around 50-60 billion dollars, and have largely severed the country off from the global financial network.
However, the Islamic Republic has found some resourceful ways of working around sanctions to keep some exports flowing and prevent a catastrophic drain of foreign exchange reserves.
Shipping sources say Iran has made ship-to-ship transfers of oil onto foreign tankers to conceal deals from sanctions enforcers, while also using discreet locations in Asia to make covert sales that are harder to track.
Still, sanctions have struck hard enough to trigger a free fall in the rial currency's value and a jump in inflation and unemployment, with businesses in the sprawling country of 75 million people struggling to adapt.
Iranians now pay up to three times more for staple foods than they did 12 months ago.
The issue of how to revive the Iranian economy loomed large in the June 14 presidential election. Moderate Hassan Rohani won in a landslide, vowing to rehabilitate Iran's foreign relations and ease its isolation. He will succeed Mahmoud Ahmadinejad, whose confrontational outbursts and poor fiscal management alienated many abroad and compounded Iran's economic plight.
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