The Wall Street Journal said people briefed on the action reported that this one bank alone was the channel for as much as 60 percent of Iran’s crude oil revenues last year.
The bank was identified as the Noor Islamic Bank in Dubai. Most stunningly, the chairman of the bank, Shaikh Ahmed bin Mohammed bin Rashid Al-Maktoum, is the son of Dubai’s ruler.
Noor acknowledged what it was doing when it was caught and halted its operations with Iran in mid-December, the Journal reported. Whether coincidental or not, the recent dramatic slide in the value of the rial began at about the same time Noor shut down its conduit for Iran.
The US Treasury Department has said nothing publicly about Noor, neither confirming nor denying the story in The Wall Street Journal.
The Journal said Noor emerged as a crucial conduit for Iran only last year as US banking restrictions shut down other routes one after another.
Dubai is one of seven emirates federated as the United Arab Emirates (UAE). Abu Dhabi is the dominant emirate and its ruling Nahyan family has sided with the United States in squeezing Iran economically. Under UAE rulings, much of the sea trade the UAE has had for centuries with the emirates has been curtailed.
Dubai has been the center of that trade and has long been close to Iran.
In 2009, Dubai was grossly overextended when the global financial crisis began. It was bailed out by Abu Dhabi and is now much less independent and much more beholden to Abu Dhabi.
Late last year, US Treasury officials detected a mass of financial transactions involving Noor and Iran. They contacted the bank directly as well as showing the evidence to Dubai and Abu Dhabi monetary authorities. The bank was threatened with sanctions that would cut it off completely from any dealings whatsoever with American financial institutions.
The Journal said Noor then notified the US Treasury that it would comply with US demands and cut its ties with Iran.
Presumably in response to the loss of the conduit for as much as 60 percent of its oil revenues, Iran has been trying all sorts of alternatives in recent weeks. It is talking to buyers about barter arrangements for example, offering to trade oil for wheat with Pakistan announcing it will accept gold bars in payment, and negotiating arrangements for payments in local currency.
It recently worked out an arrangement with India for Indian buyers to pay 45 percent of their bills in rupees into an Iranian account in an Indian bank. Iran will use that money to buy Indian products about triple what Iran has bought from India in recent years.
But no Indian refineries are yet paying anything in rupees. Under Indian law, such payments are subject to a heavy tax, and the refineries say they won’t use that payment route unless they are exempted from the tax. They are already buying more oil from countries other than Iran.
Japan and South Korea are still negotiating with the United States over how much they will have to reduce Iranian oil purchases in order to win a waiver from sanctions from President Obama. The US law says they can get a waiver if they make “significant” reductions in Iranian oil sales. That word is not defined in the law.
Last month, Japanese and South Korean media spoke of reductions around 10 percent. Now the media is talking of cuts around 20 percent. But there is still no agreement with Washington, suggesting the number will rise still further.