Persian Gulf States Shield Iran’s Banks from US Pressure

A03211332.jpgTEHRAN (FNA) – Iran’s Persian Gulf Arab neighbors such as Bahrain and the United Arab Emirates are helping shield Tehran’s banking system from Washington’s “financial terrorism”, the governor of Iran’s central bank said on Tuesday.

The United States has been trying to cut Iran’s access to the global financial system, including by putting pressure on the Persian Gulf Arab governments to isolate Iran.

The pressure is not working because cultural, political and economic ties between Persian Gulf oil producers were too strong, Tahmasb Mazaheri told the Reuters Islamic Finance Summit.

“Neither us nor our neighbors will sacrifice our long-term interests because of the unilateral pressures,” Mazaheri said.

“Particularly in the region, Bahrain and the Emirates and other neighbors all around Iran’s borders, we have a lot of partners who are working with us in the long term,” he said.

He did not explain what form their assistance took.

Iran has long had close economic ties with the Persian Gulf states, especially in the UAE and Bahrain, Arab allies of Washington and home to the Middle East’s biggest financial centers.

Foreign banks have been yielding to pressure. France’s BNP Paribas and Calyon, the investment banking arm of Credit Agricole, stopped offering Letters of Credit on Iranian fuel imports because of pressure from Washington.

“I call it kind of financial terrorism in the financial industry … and it cannot be tolerated by the global financial system,” he said.

“The central bank assists Iranian private and state-owned banks to do their commitments regardless of the pressure on them,” he said.

The US, which has a naval base in Bahrain, is pressing the United Nations to tighten sanctions on Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries.

Iran, also holder of the world’s second-largest reserves of natural gas, was retaliating by diversifying its more than $72 billion of reserves away from the weak US currency, Mazaheri said.
“We have tried to avoid keeping dollars and giving the dollar the benefit (of demand from our reserves),” he said.

The central bank’s motivations for diversifying its reserves were both “political and also because of the trend of the weakening dollar”, Mazaheri said. The dollar fell to record lows against the euro and a basket of major currencies last year.

Meantime, a new report to the US Congress questioned the impact of 20 years of US economic sanctions on Tehran.

In a report released yesterday, the investigative arm of Congress challenged the impact of US sanctions against Iran dating to 1987. Tehran has circumvented many economic sanctions, it concluded, noting Iran’s ability to negotiate $20 bln in contracts with foreign firms since 2003 to develop its energy resources. With the country’s oil wealth, Iranian banks also have funded their activities in currencies other than the dollar.

“Iran’s global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it…,” the Government Accountability Office said. “Iran’s overall trade with the world has grown since the US imposed sanctions, although this trade has fluctuated.”

The report also faults the Bush administration for not developing a system to assess sanctions and recommends that Congress require the National Security Council to do so and report results regularly to Congress.

The report comes as the Bush administration is struggling to salvage a new UN resolution on Iran. Secretary of State Condoleezza Rice is expected to meet with representatives of the world’s major powers in Berlin on Tuesday to try to work out disputes that have significantly watered down new punitive measures on Iran, European and US officials said.

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