The battle between Washington and Tehran was brought centre stage in Singapore last night as US Treasury secretary Hank Paulson urged vigilance over the “specific threat” from Iran, following the designation last week by the US of a major Iranian bank as a terrorist financier.
An otherwise unremarkable G7 meeting concluded with an agreement to intensify efforts to combat “proliferation networks as well as terrorist and illicit financing, by addressing global financial vulnerabilities, particularly those associated with jurisdictions that have failed to recognize international standards.”
It’s not a question of immediate Iraq-style sanctions, Paulson said following the G7 conclave. “We have an educational job to do,” informing governments and banks about how Iran is allegedly financing terrorism as well as its nuclear programme, he said. There is a “need to be vigilant” from “specific threats from North Korea and Iran.”
Aleksei Kudrin, Russian finance minister, said at a press briefing that the G7 had discussed ways of blocking financial flows used for the sale or transfer of weapons of mass destruction.
Paulson made a special point of explaining the need to put Iran on the G7 agenda. He had read “intelligence [that] showed the extent of Iran’s network to procure technology for weapons of mass destruction”. This showed a broad network of “mundane” front companies – “they’re not called Nuclear Corp” – that do procurement, and also terrorist financing.
Emerging Markets asked Paulson whether Washington would be putting this intelligence into the public domain. “Some of it is declassified, so we can discuss it in general terms with banks,” he replied. More than 30 “front companies” had been identified.
Emerging Markets also asked whether last week’s designation of Bank Saderat as a terrorist funder was the first step towards a wider move against the Iranian banking system. “Bank Saderat was involved in terrorism and we sanctioned them,” Paulson said.
While Paulson played down the extent of US action and underlined its “educational nature”, Washington has been keen to push Iran onto the G7 agenda. It claims Bank Saderat was a key funding institution for Lebanese Hizbollah, which used large amounts of Iranian weaponry in its midsummer war with Israel.
As Emerging Markets reported yesterday, Bank Markazi (Central Bank of Iran) governor Ebrahim Sheibany has said that Tehran is looking at all available forms of recourse, including legal action and an accelerated move out of the dollar, to counter the US’s designation of Saderat.
“Iran has been rather successful in countering every move the US has tried in recent months,” an Iranian analyst told Emerging Markets yesterday. Most G7 officials were less keen to discuss the Iran question. The US position has persuaded Iran and some other countries to put more funds into the euro and other currencies.
Asked by Emerging Markets whether such a trend would put added pressures on the euro, European Central Bank president Jean-Claude Trichet declined to comment on specifics. “We have never had an active policy of promoting, or discouraging, the euro,” he said.