Not to be ignored: Another possible reason for war

Iran cuts dollar-based transactions to 'minimum'

TEHRAN, Nov 14 (AFP) Nov 14, 2006

Iran said Tuesday it was reducing dollar-based transactions to a minimum in response to US curbs on Iranian banks amid rising tension over the Islamic republic's nuclear programme.

"We will carry out our foreign currency transactions with currencies other than the dollar and our use of the dollar will reach a minimum level," Economy Minister Davoud Danesh Jafari was quoted as saying by student news agency ISNA.

"Some US banks have been disrupting our dollar transactions for a long time and Iran, in return, has been decreasing its dependence on the dollar," he added, without elaborating.

The move comes after the US Treasury Department in September announced that it had barred Iran's state-run Bank Saderat from having any links with US-owned banks because of its "support for terrorism".

The United States cut diplomatic relations with Iran in the wake of the Islamic revolution in 1979 and also slapped an almost wholesale trade embargo on the country.

Tensions are rising once more over Iran's nuclear programme, which the United States alleges is cover for a drive to acquire atomic weapons, a charge vehemently denied by Tehran.

According to Iranian banking sources, several top European banks are now also refusing to carry out dollar-based transactions to and from Iran, or to open credit lines for Iranians in dollars for fear of facing US penalties.

This has pushed Iranian businesses to use other foreign currencies or apply through costly and time-consuming procedures at smaller banks, an Iranian exports bank official in charge of foreign currency transactions told AFP.

"The outcome of this US political move is that Iran is now regarded as a risky country and no big bank would grant loans and financial facilities under such unstable conditions," the bank official said on condition of anonymity.

"This would obviously impose great losses on our banks in Iran as well as those importers or exporters that have to deal with foreign banks," the official said.

One Iranian private bank is openly encouraging customers to replace dollars in money transfers from and to Europe.

"Dollars are not being transferred by European banks for now. So, customers should better use the euro or sterling," the bank's official in charge of international affairs told AFP, also declining to be named.

A money-changer said businesses are going through repeated money exchanges from rial to dollar via other currencies outside Iran because the dollar is the only acceptable option in some deals.

"The normal European banks have cut down on deals with Iran over the past month, therefore we used Asian banks to execute our transactions, even with a high commission," said the money-changer.

"Some Iranian businessmen with dual nationality have opened new accounts as foreign citizens to keep their money transactions alive in those banks," he said.

Iran's foreign current account surplus was estimated at 8.15 billion dollars in 2005, a Business Monitor International report said.

Its top import and export partners include China, France, Germany, Italy and Japan, mainly for oil, petrochemicals, metals and agricultural goods.

The Islamic republic is facing UN Security Council sanctions over its refusal to halt sensitive nuclear work, although these are initially not expected to impact Iran's broad economy if imposed.

Original article posted here.