Reputation: US and Iran trade words

Mr Ali Jahani, Director, Public Relations,Central Bank of Iran,Tehran has issued a statement on behalf of the Bank setting out Iran's work in combating money laundering. In recent months, Iran has issued new regulations and taken active steps to monitor banks more closely.

But as it has done so, the USA has applied sanctions to Iranian banks and last week threatened sanctions against the Central Bank.

The war of words is being conducted in the media: the Wall Street Journal carried a front page article called "U.S. Weighs Sanctions On Iran's Central Bank" on 25 February 2008. In that article, the paper said "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."

And the US government's line was again pushed in an article in the same newspaper on 21 March which said "The Treasury Department, citing suspected illicit activity by Iranian banks, warned other banks about the dangers of doing business with Iran's Central Bank and other financial institutions there. The warning doesn't impose sanctions on the Iranian central bank but could be a prelude to such a step.Through state-owned banks, the Government of Iran disguises its involvement in proliferation and terrorism activities through an array of deceptive practices specifically designed to evade detection."

Jahani says that this is just a ramping up of general pressure on Iran and has nothing to do with the reality on the ground.

In his statement, published in the letters section of The WSJ yesterday, Jahani said "Iranian private banks weren't subject to sanctions by the U.S.Treasury; only a few state-owned Iranian banks were recently prohibited fromsettling transactions in U.S. dollars, and consequently they have stopped their U.S.-dollar transactions. Since all Iranian imports and exports, including crude-oil transactions, are traded in non-U.S. currencies, the Central Bank ofIran doesn't need to "assist" state-owned banks in their U.S.-dollartransactions. It is, therefore, not the case that CBI helps Iranian banks to skirt sanctions."

On the same day, a Reuters article, widely disseminated, said "Defending their approach to thwarting Iran's nuclear ambitions, Bush administration officials on Thursday said U.S. financial sanctions were increasing pressure on Tehran by isolating it from the international business world. The sanctions have not yet inflicted enough economic pain to pressure Iran to abandon any ambitions to acquire nuclear weapons but the administration is still hoping it would "change the calculus" for Tehran, a senior State Department official told lawmakers."

That, interestingly, seems to support Jahani's implied point that this is about US politics and foreign policy ambitions more than outright criminal activity.

Jahani refers to the UN Security Council sanctions against Bank Sepah and says that the steps taken to ensure that the bank met commitments were in accordance with rules set by the UN, and therefore not "circumventing", as the US alleges. He says that the "CBI was vigilant to assure that theremaining commitments of Bank Sepah are fulfilled as licensed by relevant U.N.authorities."

It's not just the US media: the CBI felt that it had to answer criticisms in the Financial Times, too. In a letter to the FT which is published on the CBI website, Jahani says "Iranian commercial banks have long "steered clear of the US dollar". They now open only non-US dollar documentary letters of credit as all imports and exports are traded in non-USD transactions. Subsequently, they have also stopped completely to use the so-called "U-Turn Mechanism", a known innovative method for USD settlements which the US financial authorities were NOT UNAWARE (his capitals) of and would only work out with their implicit approval."

He went on ".. as you are fully aware, the Iranian banking sector and quite recently the CBI have become the focus of attention by some of the world media as a result of unilateral and biased decisions by the US treasury authorities for which there is no solid and legally justifiable evidence. Therefore, I would like to once again reiterate that the Central Bank of Iran (CBI) has always adhered to the best international practices and respected the international laws. The international financial community meanwhile, has always appreciated the professionalism of the management and staff of CBI and can be the best judge of that."