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Strategies & Market Trends : World Outlook -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (8272)	5/24/2007 9:51:17 PM
From: Les H	Read Replies (1) \| Respond to of 49664

Bush and the Generals foreignaffairs.org

To: Les H who wrote (8272)	5/25/2007 10:59:02 AM
From: elmatador	Read Replies (1) \| Respond to of 49664

Foreign Banks Still Consider Iran Lucrative Market Despite US Treasury Curbs By Victor Comras The US Treasury Department’s financial curbs on Iranian banks and its new outreach program concerning the risks of doing business with Iran are undoubtedly having an impact on international financial dealings with Iran. According to Treasury officials more than 40 international banks have either cut off or cut back business with the Iranian government or private sector. Several of these banks, including UBS, Credit Suisse, HSBC, Standard Chartered and Commerzbank, have acted voluntarily in the face of pressure from Treasury and a burgeoning divestment movement led by Congress and state and local pension funds. These are important steps that need to be expanded and replicated by others. But, it is still too early for US officials to declare satisfaction, as some are now doing, with the progress we are making, or to declare that these actions are putting serious pressure on Iran’s economy, or on its leaders. There are no indications, yet, that Iran’s leaders are reconsidering their uranium enrichment and missile development programs, or that Iran’s growing merchant class is now pressing them to do so. There are indications that a number of international banks still consider Iran a very lucrative market. We must continue to increase the pressure on Iran and on those doing business with Iran if we are to avoid the need for more drastic measures down the road. The fact is that Iran and its leaders still enjoy broad access to the international banking network and to international financial services. This includes both direct and indirect access to the very same banks that have declared their intentions to withdraw from the Iran marketplace. Europe has not followed our lead when it comes to restricting Iranian banking services. They have done little beyond freezing the activities of Bank Sepah in line with the requirements of UN Security Council resolution 1747. The EU has not clamped down on Bank Saderat which was designated by Treasury on September 6th, 2006. Saderat still has active branches in France, Germany, Greece, the United Kingdom, Turkmenistan, Lebanon, U.A.E. Bahrain, Oman, and Qatar. Other Iranian banks also maintain branches and extensive foreign correspondent relationships overseas. And several European institutions have simply taken advantage of the US decision to cut Iran off from US dollar clearance facilities by providing expanded Euro exchange and clearance facilities. Many of Iran’s banks, including Bank Melli, Bank Saderat, and Parsian Bank, still have access to SWIFT (whose Middle East business Partner AEG just opened new facilities in Tehran), Clearstream and other clearing house facilities. Iran has also invited foreign banks, particularly those in Germany, France, Russia, Eurasia, the Middle East and Southeast Asia to substitute for those withdrawing. Steps are underway also to authorize foreign banks to once again establish themselves in Iran itself. The significant size of committed and projected investment in Iran’s energy sector, the financing of Iranian oil exports and the continuing importance of Iran’s foreign trade have made such substitution attractive for numerous banks around the world. I have written several pieces cautioning that we cannot rely solely on sanctions that narrowly target a few Iranian banks, individuals or entities. We must target wider sectors, including Iran’s leaders, Iran’s energy sector, and Iran’s growing commercial class. Barring a credible threat of such broader sanctions, the current measures simply won’t deliver the effect we seek. Some experts argue that we cannot expect that other countries will go much farther when it comes to applying sanctions on Iran. I submit we can settle for no less. Most of the international community already agrees that Iran’s quest for nuclear weapons poses a serious threat to international peace and security. But, many countries simply shrug their shoulders, discount the urgency, or walk away from their responsibility to deal effectively with the threat. The EU still pins much hope on a failing diplomatic solution. History is replete with such examples of countries failing to act in time to avoid catastrophe. This is especially the case when no country is willing or able to take the lead. As the EU remains unable to go beyond Solana’s current negotiating mandate, the default responsibility falls to us. The test, therefore, is whether the United States still has the influence and prestige necessary to carry other countries with us. So, while we have made some important progress in cautioning foreign banks from dealing with Iran, and have put a small dent on Iran’s access to foreign banks, we simply should not yet be suggesting satisfaction with the progress made. There is still so much that needs to be done.