By GLENN R. SIMPSON
Soure: The Wall Street Journal
The Treasury Department is gathering evidence it says shows that the central bank of Iran is helping other Iranian institutions elude U.S. economic sanctions, in what could be a prelude to penalties against the central bank.
The investigation, described by financial-intelligence officials in three countries, signals a potential escalation in the financial battle Washington is waging against Tehran. Beginning in 2006, the U.S. imposed sanctions against several of Iran’s major private-sector banks, blacklisting them for allegedly supporting terrorism and Iran’s nuclear-weapons program.
Now, financial-intelligence officials say the Iranian central bank, also known as Bank Markazi, is handling U.S.-dollar transactions for the blacklisted private banks, and is also helping them by backing their existing dollar-denominated letters of credit.
The impact of any American move to sanction the central bank would depend in large measure on the extent to which U.S. allies joined in the effort. To enlist such support, the U.S. would have to make a strong public case for action.
Bank Markazi didn’t respond to telephone, email and faxed requests for comment.
The central bank is the keystone of Iran’s financial system and its principal remaining lifeline to the international banking system. U.S. sanctions against it could have a severe impact on Iranian trade if other nations in Europe and Asia choose to go along with them. That would intensify the economic pressures already facing Iran.
In addition, such sanctions could increase pressure on the United Nations Security Council — which has sought to cut off Iran’s access to nuclear materials — to take further steps against the country. They also could have a regional impact: Iran heads a consortium called the Asian Clearing Union, which allows member banks, including those in India and Pakistan, to settle international transactions easily.
U.S. officials have begun trying to lay the groundwork for a move against the central bank in public statements and meetings with key allies. In a Feb. 8 speech, U.S. Deputy Treasury Secretary Robert Kimmitt asserted that Iranian banks are attempting to remove their names from transaction records when conducting business internationally.
"This practice, which makes it difficult, if not impossible, to determine the true parties in the transaction, is even used by Bank Markazi, Iran’s central bank," Mr. Kimmitt alleged.
The U.S. has rarely sanctioned a foreign central bank, though the central bank of Iraq was included in sanctions it imposed on that country in the 1990s as it ratcheted up pressure on then Iraqi leader Saddam Hussein.
Unlike the independent Federal Reserve in the U.S., Iran’s central bank is an arm of the Iranian regime and subject to political influence. Its Money and Credit Council includes the country’s minister of intelligence.
Also unlike the Fed and many other central banks, Bank Markazi handles letters of credit and foreign-exchange transactions for private and state-owned companies. Because it isn’t included in current American and U.N. sanctions, and has accounts with many of the major European banks, it is able to tap those banks’ services on behalf of the banks the U.S. has punished with sanctions.
Among its other duties, the Iranian central bank prints Iran’s currency and manages its money supply. Like the Fed, it seeks to fight inflation with various policy tools, though it has been less successful in doing so. Iran’s official inflation rate is 13% but is believed to be higher.
Under American laws, any institution that aids an entity covered by American financial sanctions is itself liable to penalties. In practice, however, officials acknowledge that getting international support for action may require them to make a more powerful case that the Iranian central bank actually aids sinister activity, such as funding terrorism.
Officials are aiming to lay that foundation as well. Between 2001 and 2006, Mr. Kimmitt alleged in his speech, Bank Saderat, an Iranian bank, "moved $50 million from the central bank of Iran through its subsidiary in London to its branch in Beirut to the benefit of Hezbollah front organizations in Lebanon that support acts of violence." Those remarks reiterated an allegation the U.S. Treasury first leveled in 2006.
Saderat has extensive operations in Lebanon and was sanctioned by the U.S. after officials identified it as the bank used by several affiliates of the Islamist militant group Hezbollah, including the Islamic Resistance Support Organization. In general, Hezbollah doesn’t deny getting aid from Iran but says the aid is solely for social-welfare purposes.
It’s difficult to know whether the central bank would have been aware that such funds were being transferred to Hezbollah front organizations, though U.S. Treasury investigators think it is knowingly helping banks skirt sanctions.
In a speech in London on Feb. 7, Bank Markazi governor Tahmasb Mazaheri essentially acknowledged that he works to help his country’s banks evade the U.S. quarantine. "The central bank assists Iranian private and state-owned banks to do their commitments regardless of the pressure on them," he said at a conference hosted by Reuters News Service.
Mr. Mazaheri, considered a hard-liner allied with Iranian President Mahmoud Ahmadinejad, appeared to taunt Washington, saying that two Persian Gulf nations aligned with the U.S. have helped Iran circumvent the American campaign to strangle its financial system. He indicated the two countries are Bahrain and the United Arab Emirates, which have close trading ties to Iran. Mr. Mazaheri denounced the U.S. moves against the Iranian banking system as "financial terrorism."
This week, Treasury’s point man on sanctions, Undersecretary Stuart Levey, plans to visit both Bahrain and the U.A.E. in an effort to enlist more support for the U.S. campaign to isolate Iran financially.
U.S. Treasury and Iranian central bank officials met recently in Paris at a session of the Financial Action Task Force, an international body set up to combat money laundering. Officials from both sides play down the significance of the meeting, which didn’t include any one-on-one talks between the two nations. But the body has the power to significantly damage Iran if it accedes to American lobbying and formally accuses the country of engaging in money laundering or not doing enough to prevent it.
If U.S. sanctions were followed by other nations, that would further reduce or complicate Iran’s trade with U.S. allies and the country’s access to credit.
The U.S. has no power to force other countries to break off their dealings with Iranian banks, and it has failed to persuade the Security Council to enact the sort of comprehensive prohibitions it wants.
Instead, the Treasury has been designating individual Iranian banks and companies for their alleged roles in supporting terrorism and illicit trafficking in conventional arms or nuclear technology. American officials then present their evidence to government officials and banking executives in allied nations in an effort to persuade them of the risks of doing business with Iran.
Already, many banks in Germany, France and Britain have ended or sharply reduced their dealings with Iranian banks. As they have done so, much of this business has ended up in Austria, financial-intelligence officials say. An Austrian lender, Raiffeisen Zentralbank, now handles many of these transactions, an issue that Treasury officials have raised both with Raiffeisen and the Austrian government.
"As a result with our proactive dialogue with the U.S. Treasury we implemented a very strict Iran policy in 2007," a Raiffeisen spokesman said Friday. The bank "has not pursued an expansion of Iranian business," he added. "Currently, we are conducting existing [letters of credit transactions] while taking into consideration and adhering to U.S. sanctions," he said, while dollar transactions related to Iran "are generally prohibited."
The legal risks of working with Iran also are underscored by an continuing Justice Department criminal investigation into whether certain foreign banks operating in the U.S. have violated American law by conducting business with Iran through their branches in New York.