Iran has stepped up its campaign for sanctions to be repealed on two major state-owned banks, amid signs the Islamic Republic faces further international isolation. In a last ditch effort to rouse international support, central bank governor Ebrahim Sheibany has written to central bank governors – including those of G7 nations UK, Germany, Italy and France – urging them to oppose the designation of the Iranian banks as terrorist financiers.
In the letters, seen by Emerging Markets, Sheibany argued that sanctions against Iran’s major banks undermine the legitimacy of multilateral decision-making bodies such as the UN and the IMF and threaten the stability of international financial markets. US efforts to destabilize the Islamic Republic’s economy are politically motivated and contravene international law, the governor maintained.
The UN has imposed two rounds of sanctions on Iran for refusing to halt sensitive nuclear work, which the West believes is aimed at building atomic bombs. The latest steps included targeting Iran’s state-owned Bank Sepah, following last year’s move by the US Treasury against Bank Saderat.
Both moves have led to a sharp reduction in Iran’s access to export credit, which Sheibany told Emerging Markets poses “dangers to the international financial community of interference with payments systems”. The UN move represents the first time the body has imposed sanctions on a major public bank, he said.
The United States has threatened a third round of UN sanctions if Iran does not halt sensitive nuclear work, which Tehran insists has only peaceful aims. Pressure is mounting, and Sheibany fears that following further talks over UN demands, “[the US] will probably try to move to get the whole [Iranian] financial system sanctioned.”
In a letter to Bundesbank president Axel Weber, Sheibany referred to the widening of US penalties to include foreign entities doing business with Iran, including German bank Dresdner. “We have been authoritatively informed by Dresdner Bank that it has been selected as the German scapegoat for America’s problems with Iran,” he wrote, adding that the German bank has come under “excruciating pressure to close its Tehran Representative Office or face severe penalties on the US operations of its holding company Allianz, which derives 40% of its global turnover from the US market.”
“We strongly believe that the strategy of using economic measures to achieve political goals is self-defeating,” he wrote.
The central banker maintained in an interview with Emerging Markets that the US move “is a purely political decision”. He also claimed the central banks approached by Bank Markazi “have all certified that there is no basis to this judgment”. Washington claims Saderat was a key funding institution for Lebanese Hizbollah, which used large amounts of Iranian weaponry in last year’s war with Israel.
Sheibany nevertheless maintained that the sanctions will not undermine the Iranian economy. “We can do our business; there is no disruption to trade or other economic activities,” he said. “But we are cautious.”
Iran has been looking for support from international financial institutions, including the IMF, but has so far been disappointed. “The IMF has said the US can [impose sanctions on Bank Sepah] to protect US interests. We’re saying that if a member of the UN can do that, then what is the point of the international institution?”
The central banks referred to in the correspondence declined to comment.