The U.S. and European Union took steps to cut off from the international financial system Bank Tejarat, the last institution financing high-volume exports and imports between Iran and Europe.
The coordinated actions will have consequences for tens of billions of dollars in legitimate and illicit trade.
The U.S. Treasury Department yesterday designated Bank Tejarat, Iran’s third-largest bank, for providing financial services to the country’s banks and companies that are under international sanctions for involvement in Iran’s nuclear and missile proliferation. Financial institutions anywhere in the world that do business with the bank risk being cut off themselves from the U.S. financial system.
The action “strikes at one of Iran’s few remaining access points to the international financial system,” Treasury Undersecretary for Terrorism and Financial Intelligence David S. Cohen said in a statement. The move “will deepen Iran’s financial isolation, make its access to hard currency even more tenuous and further impair Iran’s ability to finance its illicit nuclear program.”
EU foreign ministers yesterday in Brussels agreed to freeze the assets of Bank Tejarat’s European branch in Paris. The specific provisions were issued early today in the Official Journal in Brussels.
The targeting of Bank Tejarat is the latest salvo in a stepped-up campaign by the U.S. and EU to persuade Iran to abandon suspected efforts to gain a nuclear weapons capability, and the action may have even more significant consequences than an EU oil embargo approved yesterday.
The EU is Iran’s principal trading partner, according to European Commission figures. The EU exported 11.3 billion euros ($14.6 billion) in goods to Iran in 2010, led by machinery, transportation equipment such as cars, and chemicals. Iran exported 14.5 billion euros ($18.8 billion) in goods to the 27-member region the same year, with fuel and minerals at the top of the list.
EU foreign ministers announced yesterday they will ban oil imports from Iran starting July 1, freeze European assets held by the Central Bank of Iran, and ban trade in gold, precious metals, diamonds and petrochemical products from Iran. The EU is collectively the No. 2 buyer of Iranian crude, taking 18 percent of Iran’s exports.
The UN’s International Atomic Energy Agency raised questions in a Nov. 8 report about possible military dimensions of Iran’s nuclear program. The report set in motion a series of actions by the U.S. and European allies in an effort to force Tehran’s leadership back to nuclear negotiations. Iran says its nuclear program is for civilian energy and medical research.
The EU asset freeze on Bank Tejarat includes a provision allowing for a two-month delay on a “case-by-case” basis for existing trade contracts, according to the new EU sanctions regulations. No one answered the telephone at the bank’s Paris office. Bank Tejarat has almost 2,000 offices throughout Iran, as well as foreign branches in Paris and Dushanbe, Tajikistan, according to the U.S. Treasury.
The EU asset freeze will complicate tens of billions of dollars in legal trade with Europe and monetary transactions by EU diplomatic missions in Tehran, according to EU diplomats, trade lawyers and consultants.
‘Burying Their Heads’
“A number of EU exporters today are burying their heads in their hands, bemoaning the fact that, as they try to come out of a recession fighting to win orders for legitimate exports to Iran, their hands are being tightened further behind their backs,” Nigel Kushner, chief executive officer of Whale Rock Legal, a London law firm specialized in Iranian trade with the EU, said by e-mail yesterday.
Kushner said some of his clients are “up in arms” over the sanctions because “they simply have nowhere else to go” to conduct legal trade.
Exports from the EU to Iran “will decline significantly”as the sanctions will make it “impossible” to do business in a safe and transparent manner, he said. The Chinese will be ready to step in, he said.
“Iran has a penchant for Western European goods, in particular German goods for which they will pay a premium,”Kushner said. “They will now have to settle for other products.”