India is poised to assist Iran in sidestepping international sanctions by using the German financial system to facilitate the transfer from India to Iran of billions of dollars annually for oil sales. The United States and the European Union should take immediate action to prevent this abuse of the financial sector. Failure to take a strong stance will allow a rogue regime to fill its coffers with the hard currency it needs to repress its people, facilitate terrorism, and build a nuclear bomb.
On March 29, Germany’s foreign and economic ministries ratified an arrangement that would allow India to transfer an estimated $12.65 billion dollars to the German Central Bank to pay for Iranian oil. The money would then be routed to Iran through the European-Iranian Bank (Europäisch-Iranische Handelsbank, or EIH), which has been blacklisted for proliferating weapons of mass destruction.
According to the Indian press, New Delhi and Tehran have been trying to find a way to conduct business for some time, as sanctions levied by the US, Europe, and the United Nations have made it difficult for Iran to move its funds internationally.
Until recently, India and Iran were using a relatively unknown clearing house based in Tehran to move billions of dollars annually. In late 2010, the US government realized that Iran was able to circumvent sanctions easily using the Asian Clearing Union (ACU), and that India was the major culprit. Since 2008, India and Iran have transacted business involving approximately $30 billion dollars using the ACU. Washington put significant pressure on the Indian government, and transactions between Tehran and New Delhi have ground to a halt.
Supporting Iran’s terror agenda
For decades, Germany has served as the Islamic Republic’s largest trading partner on the European continent. Despite Berlin’s public support of sanctions against Iran, the government feels it is in Germany’s interest to facilitate these types of transactions, with the result that Germany has long been willing to allow its financial system to be abused to help Iran promote its terror agenda.
Germany allows blacklisted banks to openly operate and transact business in Hamburg and Frankfurt. The Melli, Mellat, and Sepah banks and EIH have all been blacklisted for proliferating weapons of mass destruction by the US Treasury, and all but EIH have also been subject to UN restrictions for their role in Iran’s nuclear program. In addition, two of EIH's main shareholders, Bank Mellat and Bank Refah, are under European Union and American sanctions.
In September 2010, the US Treasury Department blacklisted EIH because it had served “as a key financial lifeline” for Iran. The bank was reportedly involved in arms trafficking, the Iranian missile program, and proliferating weapons of mass destruction.
German officials, however, are hiding behind the fact that EIH’s shareholders, but not EIH itself, have been sanctioned by the EU. German officials claim the bank is under “strict” supervision, with all transfers over 10,000 Euros requiring approval, according to Chancellor Merkel’s spokesman Steffen Seibert.
What can the international community do to stop these types of transactions from taking place? The US Treasury Department should issue a warning directed at companies that use the German Central Bank/EIH mechanism to transact business with Iran, and these companies should lose their access to the US market. The State Department should issue a demarche to the German government stating clearly that Germany is facilitating transactions with a blacklisted entity and openly allowing UN- and US-blacklisted banks to operate in its jurisdiction.
To facilitate sanctions against EIH, the US should also provide the European Council with any intelligence it possesses that can help to prove the bank is involved in illicit activity. Working with our trans-Atlantic partners to ensure a coordinated policy on Iran will help to restrict Iran’s ability to engage in illicit activity.
India needs to buy oil to fuel its economy, but there are many other sources around the globe. New Delhi’s insistence on buying oil from a rogue regime is nothing short of baffling.
As Iran marches toward obtaining a nuclear bomb, the US government should make it clear that there is a stiff cost for doing business with Iran. Countries helping Iran through oil transactions and banking relationships should be no exception.
Avi Jorisch, a former US Treasury official, is president of the Red Cell Intelligence Group and the author of Iran’s Dirty Banking: How the Islamic Republic is Skirting International Financial Sanctions
Avi Jorisch: www.avijorisch.com
Red Cell Intelligence group: www.redcellig.com
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