America is waging a financial war on Iran designed to isolate its economy from the world banking system and compel Teheran to abandon its nuclear programme.
Step by step, the US Treasury is tightening the noose by persuading European and Japanese banks to join their American counterparts and stop conducting any transactions for Iranian clients.
Deutsche Bank was the latest to begin closing all accounts held by any customers — whether companies or individuals — based in Iran. For an economy largely dependent on oil revenues, these steps are severe.
Iran finds it increasingly difficult to raise loans, obtain foreign currency or hold any assets offshore.
Because obtaining dollars, euros or yen becomes harder by the day, Iran’s ability to buy essential imports is steadily being eroded.
Foreign investment, especially in its critical oil installations, is minimal.
In effect, America is using its financial might to shut Iran out of the global economy. While the United Nations has passed two resolutions imposing sanctions on named Iranian individuals and companies — a third is likely to follow later this month — observers believe these measures are having far less impact than the financial embargo.
In a recent interview, Stuart Levey, the under-secretary for financial intelligence at the US Treasury, said these counter-measures were proving effective. “There is significant evidence that it’s working in the sense that Iranian business is being subjected to greater scrutiny and it’s more difficult for them to operate,” he said.
Mr Levey is running America’s financial campaign against Iran. The Treasury has now excluded two of Iran’s biggest state-owned banks, Saderat and Sepah, from conducting dollar transactions. American banks were formally banned from doing business with Iran 23 years ago.
Under US pressure, European and Japanese banks are treading the same path. “We have informed our clients who have an account in Germany but are based in Iran that we will close their accounts,” said a spokesman for Deutsche Bank, the eighth largest bank in the world as ranked by total assets.
UBS, the world’s biggest bank as measured by total assets, took the same step last January.
A spokesman for HSBC, Britain’s biggest bank and the world’s fourth largest, said that no dollar transactions were being conducted for Iranian clients and business links with Teheran were now minimal.
Three of Japan’s largest banks announced in June that no new business would be conducted for Iranian clients. Iran had avoided the US restrictions on dollar transactions by transferring assets into euros or yen. But this window is closing as European and Japanese banks enforce the same restrictions.
Iran has endured years of economic stagnation. High oil prices should be fuelling a boom, but financial sanctions limit Teheran’s ability to use this windfall.
A diplomat who specialises in the Muslim world said this was exerting real pressure on President Mahmoud Ahmadinejad’s government.
One Teheran newspaper recently reported that Iranian companies had seen their import costs rise by 20 or 30 per cent because they had to employ middlemen to evade financial restrictions.
Iran says that its nuclear programme is peaceful and designed only to generate electricity.
Mr Ahmadinejad accuses America of deliberately inflicting hardship on Iran’s people and insists that he will press ahead with his nuclear ambitions.
Iranian banking officials in Europe are bracing themselves for a huge wave of lawsuits from European clients following the Iranian government’s decision to withdraw millions of dollars worth of deposits to Teheran.
The government took the action in the summer to prevent the funds being seized under the terms of UN sanctions, but the move has left several leading Iranian banks, such as Sepah, on the brink of collapse.
Banking experts estimate the Iranian banks are struggling to meet commitments worth an estimated £2 billion, and Iran’s Central Bank is refusing to provide the necessary backing.
The crisis in the Iranian banking sector, which is a direct result of the measures taken by the US Treasury, has already resulted in the resignation of Ibrahim Shibani as governor of Iran’s Central Bank.
Although other Iranian banks such as Bank Melli and Bank Saderat have been badly affected by the action of the Central Bank, the crisis facing Sepah has seen customers abandon the bank which has struggled to pay workers’ salaries