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Monday, May 22, 2006

European banks avoiding business with Iran due to US pressure

The New York Times is reporting this morning that four European banks have limited their business with Iran due to US pressure on them, even in the absence of UN sanctions.

According to the Times, the four European banks — the UBS and Credit Suisse banks of Switzerland, ABN Amro of the Netherlands, and HSBC, based in London — have made varying levels of disclosure about the limits on their activities in Iran in the past six months. Almost all large European banks have branches or bureaus in the United States that are subject to American laws.

It is not clear how curbed business with four of Europe's biggest banks could adversely affect Iran. But some outside political and economic experts say it is unlikely to do much damage considering Iran is one of OPEC's leading producers and is earning hundreds of millions of dollars worth of windfall profits daily from $70-a-barrel petroleum.

The American prodding has not yet resulted in any fines or other punishment. But UBS and ABN Amro are no strangers to the sting of American financial penalties for dealing with countries that the United States has wanted to isolate. UBS was fined $100 million by the Federal Reserve two years ago for the unauthorized movement of dollars to Iran and other countries like Libya and Yugoslavia, which were subject to American trade sanctions at the time. Last December, ABN Amro was fined $80 million for failure to comply with regulations against money laundering and with economic sanctions against Libya and Iran from 1997 to 2004.

UBS now says it will no longer do direct business with any individuals, businesses or banks in Iran. UBS also says it will not finance exports or imports for any corporate clients in Iran. But the bank has said that it would not stop doing business with clients who use other means to transact business there. ABN Amro also says it has minimized its activities in Iran.

"We have no representation in Iran," said Sierk Nawijn, a spokesman for ABN Amro in Amsterdam. He added that although the bank does no dollar-based business with Iran, it was participating in "a fairly limited number of transactions" with it."

Georg Söntgerath, a spokesman for Credit Suisse in Zurich, said, "As of January, we have said that we will not enter into any new business relations with corporate clients in Iran." He said the decision, which applied to Syria and some other countries, resulted from an assessment of an "increased economic risk for our bank and our clients."

He said, however, that the bank would fulfill existing contracts with businesses in Iran.

A United Nations Security Council resolution might restrict some of those kinds of dealings.

The Americans have taken other steps to pressure Iran. With American encouragement, Iran's rating as a business risk was raised last month by the Organization for Economic Cooperation and Development, a group of 30 leading countries with market economies.

At the same time, the defiance of the West by President Mahmoud Ahmadinejad of Iran has unsettled markets, and American officials have said the climate of anxiety over the prospect of globally enforced sanctions — or even military action — was having its own effect.

"I think there is a real and growing sense that there's a risk associated with doing business with Iran, with lending Iran more money or providing it with a line of credit," said Robert G. Joseph, the under secretary of state for arms control and international security. "But I would argue that their motive is market forces, more than any American pressure."

Some European diplomats from countries with missions in Tehran say that there are signs of an impact, despite the rise in oil prices.

Whatever the cause, Iran's economic growth has slowed to less than 5 percent, its stock market has dropped more than 20 percent in the past year, new investments and construction have declined, and Iranians have been sending their money abroad, or buying gold.


Some experts say they doubt that anything short of a sweeping oil embargo, or a blockade of gasoline imports — Iran imports about 40 percent of its gasoline — could get Iran to change its behavior, and the West is not contemplating such steps.

"I don't see that the pullout of a few European banks doing a tremendous amount of damage," said Karim Sadjadpour, an analyst at the International Crisis Group, an advocacy organization. "They're making $300 million a day from oil revenues, and they can weather the storm."

Read the whole thing.


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