British banks resist US pressure to stop dealing with Iran

As this article notes the actions of the US actually break WTO rules. This is typical of the US attitude. International institutions are to be followed when the US thinks that the rules are in US interests but otherwise they can be ignored.

British banks fight US over Iran embargo


Ewen MacAskill in Washington
Thursday July 19, 2007
Guardian Unlimited


HSBC claims now to only have a small operation in Iran. Photograph: Tim Ockenden/PA.



A mounting US crackdown on foreign companies and banks doing business with Iran is provoking serious opposition in the UK and Europe, where diplomats are warning that the action could lead to a new trade war.
Congress wants all international companies to end their investment in Iran now and is pushing through a bill that would penalise companies that fail to do so. The British government, along with other European governments, views the US approach as draconian and are lobbying hard against it.




The US move reflects frustration at the failure so far of western diplomacy to persuade Iran to stop its uranium enrichment programme, which the US, Britain and others suspect is a step towards achieving a nuclear weapons capability. Iran denies it has ambitions to build a nuclear weapon.
A senior British banking source said today there was a great deal of annoyance in the City with the US approach. The two British banks most frequently mentioned in Washington in relation to Iran are HSBC and Standard Chartered.

The banker said both HSBC and Standard Chartered have run down their operations in Iran and maintain a modest presence in Tehran. However, much of their former business there, which consisted principally of managing payments between companies, has now been picked up by German and French banks, whose governments have resisted pressure from Washington, the source said.

The US state department has been pressing for disengagement for months. But the move is being given added impetus by the Iran counter-proliferation bill going through Congress, which would penalise the US interests of companies that continue to have a presence in Iran. European governments are lobbying against the bill.

The chairman of the House foreign affairs committee, Tom Lantos, said: "Our goal must be zero foreign investment." The bill appears to have overwhelming support in Congress.

Congress passed the Iran and Libya Sanctions Act in 1996 that threatened action against non-US governments and companies, but gave the state department discretion over when to implement it. The new bill proposes to remove that discretion.

The US state department prefers persuasion to coercion, fearing the latter will alienate allies, and is opposed to the bill.

The United Nations security council has so far passed two resolutions imposing limited sanctions against Iran, mainly economic and travel bans, and a third round of sanctions is being discussed.

The US administration sees it as inconsistent for European countries to support sanctions but to allow companies to continue trading. But the British government says that it has no legal basis to order the banks to close their Iranian operations. European diplomats meanwhile say that the US is aiming at the wrong targets and should be focusing on Arab and far east banks and companies that have greater exposure to the Iranian market.

They point out that any penalties imposed by the US would be in breach of World Trade Organisation rules. A senior US official said that there have been discussions between Stuart Levey, the US undersecretary of state at the Treasury, and the British government, though he acknowledged the involvement of British banks and companies was not as deep as some on the continent.

He said the European Union had $22bn (£11bn) in export credits to Iran in 2005, the latest figure available.

"So we have been in discussions with many of the leading governments - Germany, France, Italy, Spain - the four largest countries with exposure to export credits. This is really quite inconsistent with where we are going with UN sanctions," he said. "We have had two sanctions resolutions: so why would you be promoting trade with Iran?"

He added: "Germany and Italy and France have all told us they have begun to diminish (their involvement). There has been a slight downturn."