WASHINGTON—The Bush administration turned up the heat Tuesday on Iran, barring one of its largest state-owned banks from doing business with U.S. citizens, residents, banks or businesses because of its involvement in Iran's nuclear program.
The Treasury Department Office of Foreign Assets Control's designation of Bank Sepah as a "facilitator" in Iran's nuclear program—the second such U.S. action in less than six months—will encourage banks across the globe to curtail their lending to Iran. A lending squeeze would hit Iran's vital oil sector particularly hard.
Bank Sepah, Iran's fifth-largest state bank, provided financial services to two Iranian companies that are involved in developing missiles capable of delivering weapons of mass destruction, said Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence.
The Iranian bank, Levey alleged, also facilitated business between Iran's main aerospace company and North Korea's chief missile-export agency.
"The financial relationship between Iran and North Korea, as represented by the business handled by Bank Sepah, is of great concern to the United States," Levey said.
North Korea already has developed nuclear weapons, but Iran says it seeks nuclear know-how only for peaceful purposes.
The Treasury Department's announcement came a day before President Bush is to announce his new plan for Iraq, and appeared to be further evidence that Bush will continue to pressure Iran rather than engaging it diplomatically, as the bipartisan Iraq Study Group recommended last year.
Secretary of State Condoleezza Rice spent more than six months trying to persuade the U.N. Security Council to adopt tough sanctions on Iran. But the council passed a weak resolution in December that had been watered down by Russia, which has extensive business interests in Iran.
A State Department official, who wasn't authorized to speak publicly and did so on the condition of anonymity, said the Bush administration planned to pursue unilateral actions that didn't require further U.N. action.
The administration "got as far as they could" via the U.N. route and the December resolution was "far from satisfactory," the official said.
Still, Levey cited the resolution Tuesday in announcing the designation of Bank Sepah. He said the resolution required governments and companies everywhere to cease doing business with Iranian companies that were tied to the controversial nuclear program.
Another State Department official, who also requested anonymity, said the U.N. resolution "does provide enough cover to do these kinds of things."
The sanction of Bank Sepah affects not only its nearly 300 branch banks within Iran but also the operations of a wholly owned subsidiary in Great Britain and Bank Sepah operations in Rome, Paris and Frankfurt, Germany. Treasury officials said Bank Sepah had assets of nearly $14 billion in 2005.
The Treasury Department designated Iran's Bank Saderat as a financier of terrorism last September, and Tuesday's action further isolates Iranian banks from the global financial community, cutting off finance sources for Iran's oil sector.
"That is the ultimate target," said Mehran Kamrava, an Iranian-born political science professor at California State University-Northridge. "It's yet another move by the U.S. government designed to . . . send a signal to the international community that the costs of doing business with Iran have increased."
It's a signal that's getting across, said Clifford Kupchan, an Iran expert for Eurasia Group, a political risk consultancy.
"What has been having an effect is increasing self-sanction by the international finance community," he said. "Major European banks have curtailed operations in Iran. Some Asian banks have become gun-shy and are starting to slow down" their investment in Iran.
The Treasury Department's designation of Bank Sepah is available online at http://www.treasury.gov/press/releases/hp219.htm
Treasury Undersecretary Stuart Levey's remarks Tuesday are at http://www.treasury.gov/press/releases/hp220.htm
(c) 2007, McClatchy-Tribune Information Services.
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