Iran moves finances out of Europe's banks

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Friday, January 20, 2006

Map highlighting Iran.

Iran, has decided to pull its finances out of European banks and into different foreign banks. A senior Iranian official stated that this is an attempt to pre-empt possible U.N. sanctions over its resumption of nuclear fuel enrichment activities.

Comments by Iran's central bank governor Ebrahim Sheibani, carried on air by the ISNA student news agency, confirmed that Iran had started transferring funds.

"We transfer foreign reserves to wherever we see as expedient. On this issue, we have started transferring. We are doing that," Sheibani told the ISNA agency.

Ebrahim Sheibani also told the agency that the assets were being moved to an "undisclosed" location.

It is unknown exactly how much money is involved or whether or not Iran's investments in Europe would be affected by the move. Traders have said that they had already factored such a possibility into the market.

Gary Samore, an expert on Iran and vice president for international programs at the McArthur Foundation in Chicago, said "the move reflected concern by Tehran that the Europeans might take unilateral measures amid the crisis over its nuclear program." He also added that its decision to pull its assets from Europe "makes sense in terms of preparing for the possibility that Europe might take some measure to impose some financial sanctions. I don't know that it changes the diplomatic formula. The key issue is still the question of whether or not the Western group can engineer a formal referral to the Security Council."

It is unclear if an asset freeze or other punishment is imminent in Iran, but it has happened before. The country's assets in the United States have been frozen since Iranians seized the U.S. Embassy in Tehran and held its staff hostage after the 1979 Islamic revolution.

An Italian court last year had ordered an Iranian bank account to be frozen at the request of U.S. plaintiffs who were seeking compensation for terrorist acts they believe were supported by the country (Iran).

Earlier the EU drafted a resolution that calls for referring Iran to the 15-nation council. But it is said to stop short of asking for punitive measures against Iran. The IAEA is expected to meet on February 2, 2006 to discuss Europe's draft.

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