Islamic world in an effort to get around American banking sanctions that are bedeviling the Islamic Republic, The Washington Post reported last Wednesday.
State Department spokesman Mark Toner confirmed the Iranian tactic. He said it was “a topic of discussion with our allies,” indicating that Washington was trying to shut down the banks. Toner also said the Iranian effort “is an indication, frankly, that the sanctions are having some effect,” contrary to Iranian denials.
Most analysts agree that the US financial juggernaut is having far more success in throttling the Iranian economy than any of the more highly published formal sanctions. For five years, the US Treasury has been approaching banks throughout the world and leaning on them to cut off their business ties to Iran.
The Post named Iraq and Malaysia as two countries where Iran had been trying to set up banks, using dummy names and opaque ownership structures.
But it isn’t clear that the effort has or can solve Iran’s problem of lack of access to international banking.
Matthew Levitt, a former Treasury Department official and director of a counter terrorism and intelligence program at the Washington Institute for Near East Policy, said the banking operations, even if successfully established, are likely to be small-scale and inadequate to make up for the volume of banking activity Iran has lost.
A senior administration official told the Post, “The Iranians, we believe, are trying to set up operations in a number of places, and it’s an indication that they can’t do normal banking. They want to buy banks and set up banks in various places where they believe they will be able to carry out business without the United States being able to impede it.”
Tehran has established two banks in Baghdad, including one affiliated with Bank Melli, Iran’s largest commercial bank. The UN Security Council listed Bank Melli in 2008 as being involved with Iran’s nuclear activities, and the European Union has shut down all of Bank Melli’s offices in Europe.
Iran also has tried—without success—to establish commercial banks in Iraqi Kurdistan, an Iraqi official told the Post.
The newspaper said Treasury officials have fanned out across the globe in recent weeks, visiting such countries as Azerbaijan, Turkey, the United Arab Emirates, Bahrain and Lebanon. Treasury and State Department officials have warned “local authorities of the risks of letting these operations take root,” the U.S. official said.
Azerbaijan has a branch of Bank Melli in Baku, and last month Iran offered to create a joint bank for the two countries, according to Azeri news reports. In 2008, the U.S. Treasury Department alleged that Futurebank in Bahrain was controlled by Bank Melli, but it continues to operate there.
For years, the United Arab Emirates was an important conduit for Iranian goods and financial transactions. But since the latest UN Security Council sanctions were approved in June, the UAE has cracked down on Iranian activities, in part by curtailing financial dealings with Iranian banks blacklisted by Washington.
In response, the Post said Iran appears to have tried to enlist Malaysia as a new financial hub, but without success, according to the US official it spoke with.
“As the Emirates have begun to take stronger measures, the Iranians are looking for other financial and commercial centers that they can exploit,” he said. “It’s clear that they have had their eye on Malaysia for a while. It is a constant topic of discussion with Malaysia authorities.”
Malaysia has been a transshipment hub for suspect goods for Iran, making it a logical place for financial transactions. But this year, the Malaysian government announced it had enacted an export-control law intended to strengthen its ability to curb trade in materiel for weapons of mass destruction.
The US official praised the steps taken by Malaysia, including the suspension of the local branch of Iran’s second-largest bank, Bank Mellat.