Last European bank will stop handling dollars for Iran

Section:

Iran Begins to Feels
the Financial Squeeze

By Michael Connolly
The Wall Street Journal
Wednesday, January 10, 2007

Evidence appears to be growing that Iranian firms are feeling the pinch of the U.S.-led drive to have banks curtail transactions with Iran's state-controlled banks. Iranian banks and companies, for instance, are now having to put up large deposits -- as high as 100% -- in foreign banks to get them to issue letters of credit for foreign transactions.

The U.S. government's attempt to isolate Iran's economy will get a significant boost this month when the last European bank known to be clearing large volumes of dollar transactions for Iran in the U.S. halts the practice. Commerzbank AG, Germany's second-largest bank, said it will stop handling dollar transactions for Iran at its New York branch by Jan. 31. Choking off Iran's financial ties to Europe is key to Washington's effort to isolate the country, as Glenn R. Simpson in Brussels and David Crawford in Berlin report. The European Union is Iran's largest trading partner by far. Trade between the two topped $25 billion last year, but trade growth is stagnating, largely because of U.S. pressure.

During the past year, most European banks with longstanding relationships with Iran have bowed to U.S. pressure and sharply curtailed transactions with Iran's state-controlled banks, which the U.S. says support terrorism. The U.S. is also seeking to financially quarantine Iran because of Tehran's vows to press ahead with its nuclear program in defiance of international will. In a related move, the U.S. Treasury Department on Tuesday named Iran's fifth-largest state-owned bank, Bank Sepah, and its subsidiaries as weapons proliferators and barred banks operating in the U.S. from handling any transactions on their behalf.

At present, Commerzbank handles both dollar and euro transactions for Iran's state-owned banks. Like several other European banks, it will cease handling only dollar transactions. That is likely to limit the economic damage to Iran, enabling the country's banks to continue paying suppliers who will accept euros or other currencies. But it's also likely to subject Commerzbank and its peers to further U.S. pressure.

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Join GATA
at the
2007 Vancouver Resource Investment Conference
Vancouver Convention and Exhibition Centre
Sunday and Monday, January 21 and 22, 2007

http://www.cambridgeconferences.com/ch_jan2007.html

Admission is free for those who register in advance. The conference has arranged discount rates at the Pan Pacific Hotel adjacent to the convention center.

GATA will hold a reception at the conclusion of the conference: from 6 to 8 p.m. Monday, January 22, in the Cypress Suite at the Pan Pacific, 999 Canada Place. The Cypress Suite is on the hotel's restaurant level, one floor above the lobby. The reception will offer snacks, a cash bar, and some brief remarks by GATA's delegates to the conference, including Chairman Bill Murphy. There will be no admission charge for the reception but so that we might prepare better, if you plan to attend please let Secretary/Treasurer Chris Powell know by e-mail at CPowell@GATA.org.

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