Financial sanctions force Iran to look East

Small, mid-sized banks in UAE, China, Malaysia are prepared to do business with Teheran.

ahmadinejad 224.88 (photo credit: AP)
ahmadinejad 224.88
(photo credit: AP)
Facing sanctions by banks in the US and Europe, Iran is increasingly looking to banks in China, the Persian Gulf and Southeast Asia to give it letters of credit, according to Israeli government officials. "The Iranians are looking for banks wherever there is a substantial banking system," one official said. "They have tried banks in Turkey, and have even tried buying banks in Turkey, but have not succeeded." The officials said the Iranians have located banks - usually smaller and mid-sized banks - in the United Arab Emirates, China, Malaysia and India with which to work. The bigger banks are hesitant to do business with Iran, fearful that this would put them in the bad graces of the US and they would subsequently lose the support of the international monetary system, they said. The talk of further economic sanctions has speeded up this trend, and British Prime Minister Gordon Brown's announcement Monday that the assets of Iran's largest commercial bank, Bank Melli, would be frozen in Britain and Europe have increased Iran's interest in locating other banks to work with. The Israeli officials said that the financial sanctions taken by US and European financial institutions have so far been the most effective steps against Iran. The action against Bank Melli that Brown announced could have "major implications," they said. The officials said that a visit to Turkey earlier in the year by Stuart Levey, the US Treasury official spearheading US efforts to get the world's financial institutions to sever ties with Teheran, went a long way in keeping Turkish banks from being a conduit for the Iranians. Although there is a lot of trade between Iran and Turkey, largely because they are neighbors, the Turks are aware of the sensitivity of the issue and have fulfilled the UN sanctions against Iran, the officials said. "Turkey has commercial ties with Iran," one official said. "There was some concern by the US about the Turkish banking system, but it does not now seem to be the most major concern. The United Arab Emirates is a more serious problem." The official said that Turkey was still interested in joining the EU, and its banking system was trying to maintain European standards. "We don't see the Turks as having any interest in getting involved in wheeling and dealing with the Iranians," the official said. Meanwhile, Iran has withdrawn $75 billion from Europe to circumvent a proposed freeze of Iranian assets in any future sanctions over the country's controversial nuclear program, The Media Line news agency reported. In addition, the Iranian weekly Shahrvand-e Emrouz has reported that Iran's deputy foreign minister for financial affairs, Muhsin Tala'i, said some of Iran's assets had been transferred to gold and shares and other assets had been transferred to Asian banks. The paper said the money withdrawal had been decided upon by Iranian President Mahmoud Ahmadinejad. Teheran has defied calls to halt its uranium enrichment activities and upholds its right to possess nuclear technology, insisting the program is for the peaceful purposes of creating energy. Three rounds of United Nations sanctions have been imposed on Iran since 2006. After Brown announced Monday that the European Union would impose new economic sanctions on Iran, saying Europe would freeze the accounts of some of Iran's largest banks and would introduce new oil and gas sanctions, EU Foreign Policy Chief Javier Solana denied that any concrete decisions on the matter had been made. Following a meeting with United States President George W. Bush in London on Monday, both Brown and Bush said Iran would face tougher sanctions if it continued to reject calls for dialogue. Bush said he was willing to solve the issue diplomatically but added that "all options are on the table," an indication that military action against Iran's nuclear facilities has not been ruled out by the Bush administration.