US pushes EU to shut down Iranian banks

US pushes EU to shut down Iranian banks

By Daniel Dombey in Washington, Roula Khalaf and James Blitz in London

Published: February 12 2008 19:27 | Last updated: February 12 2008 19:27

The US is pushing the European Union to increase the pressure on Tehran over its nuclear programme by stopping two Iranian banks from operating on European soil.

The plan to take steps against Banks Saderat and Melli – a move also backed by Paris and London – would build on a United Nations Security Council resolution that the US and the EU hope to push through this month.

So far, Germany, Italy and other European states have resisted taking EU action to ban Saderat and Melli – which Washington alleges are involved in terrorist financing and proliferation activities – because neither bank has yet been the subject of UN action.

The lack of an EU ban has left the UK, the US’s closest ally, unable to prevent a branch of Saderat from operating in the City of London – a fact which blunts the effectiveness of the US’s drive for international action against the banks.

The US, Britain and France last month reached agreement with Russia and China on a draft Security Council resolution that would call on UN member states “to exercise vigilance over . . . Bank Melli and Bank Saderat, and their branches and subsidiaries abroad”, as well as over Iranian banks generally.

This falls short of the asset freeze the US and the EU had sought. Washington, London and Paris believe the proposed UN resolution could break the deadlock in the EU and undermine Iran’s financial ties with Europe – even though the draft UN text has yet to be agreed by other Security Council members such as South Africa and Libya.

The US believes that tighter EU sanctions will put pressure on other nations that do more business with Iran – China for example – to curb their activities.

“We will be pushing the EU to go further than the Security Council,” a diplomat said. “We could ‘gold plate’ a Security Council resolution when we implement it at the EU level, although some other EU member states may be reluctant.”

A previous example of such ‘gold plating’ came last year when the EU implemented two previous Security Council resolutions on Iran. In similar language to the current text on Banks Saderat and Melli, the UN had called for “vigilance and restraint” concerning the movements of individuals linked to Iran’s nuclear and missile programmes and members of its Revolutionary Guard. But in implementing the resolutions, the EU subjected all the named individuals to a travel ban – a much tougher measure.

The US is expecting the third UN resolution to pass regardless of the results of a report by the International Atomic Energy Agency – which could be published as early as next week – which will assess whether Iran has answered all outstanding questions over its nuclear programme. Washington is calculating that Tehran will fail to comply with all the IAEA requirements.

Although the text of the UN resolution has been watered down, western powers seeking more pressure on Iran say approval of the resolution would send an important political message to Tehran – that its claims to have derailed the UN process are unfounded.

Iran declared victory after last December’s US National Intelligence Estimate said that it had halted its nuclear weapons programme in 2003. Iranian officials have said the findings suggest there is no need for further sanctions, especially given that Iran has a “work plan” with the IAEA designed to clarify past suspicious activities.

The US, however, has sought to undermine that impression. “Iran’s strategic position is not as comfortable as Iran believes it to be,” Nick Burns, US undersecretary of state, said Monday in a speech to London’s International Institute for Strategic Studies.

UN and, more importantly, US financial sanctions have hurt the ­Iranian economy but the authorities’ attitude has been that the pain is manageable.