Iran shifts billions from banks in Europe amid fears of UN sanctions

Iran shifts billions from banks in Europe amid fears of UN sanctions

· Tehran's nuclear stand-off intensified by transfers
· British invite to Afghan talks irks wary Americans
Ewen MacAskill and Jill Treanor
Monday January 23, 2006

Guardian
The Iranian government has started moving billions of pounds in assets from Britain and the rest of Europe in case international sanctions are imposed over the nuclear crisis.

Ebrahim Sheibani, the governor of the Iranian Central Bank, confirmed Tehran had started shifting funds, according to Iranian news agency ISNA.

Mr Sheibani said: "We transfer foreign reserves to wherever we see as expedient. On this issue, we have started transferring. We are doing that."

Iran's pre-emptive action marks a significant escalation in the stand-off between Iran and the west. It is the firmest sign yet that Tehran fears sanctions will be imposed. The move is defensive, as the amount is not big enough to worry European banks. But it pushed oil prices to a four-month high above $67.

Western diplomats cautioned that ISNA occasionally misquoted government figures. But a senior Iranian official told Reuters that the report was accurate.

Britain, France and Germany, backed by the US, are to press for Iran to be referred to the UN security council at a meeting of the International Atomic Energy Agency, the UN's nuclear watchdog, on February 2. The Americans and Europeans claim Iran is engaged in a covert programme to build a nuclear weapon. Iran denies the charge.

The Bank of England estimates Iran held about £2.25bn in assets in Britain at the end of last September. Iran's total overseas assets are reckoned to be about £17bn, held mainly in Europe and Asia. The funds could have been transferred from Europe to Asia.

Iran has bitter memories of its US assets being frozen shortly after the 1979 Islamic revolution. The US has kept sanctions in place since then.

The security council could impose worldwide sanctions but such a proposal could be vetoed by Russia or China. If the security council was blocked, the US could pressure Britain, France and Germany into applying sanctions, ranging from a travel ban on the Iranian leadership to a freeze of assets or a full-scale trade ban. Such a ban would hit hardest in Germany, Italy and France.

Tehran could opt for a series of retaliatory measures. The Foreign Office confirmed late last year that Tehran had imposed an unofficial trade ban on Britain by delaying imports.

Turkey's energy ministry yesterday announced that the flow of natural gas from Iran had dropped almost 70%, a worrying development as an extreme cold snap is predicted. Iran, the world's fourth largest oil exporter, could also disrupt oil supplies, sending prices soaring and creating havoc in western economies.

US, British, French, German and other diplomats are to discuss Iran on the sidelines of a conference on Afghanistan in London on January 31 and February 1. The next day, the Europeans are planning to table a resolution at the IAEA in Vienna calling for referral to the security council.

The British government has invited Iran, as a neighbour of Afghanistan, to the London conference but Tehran has not yet responded. The US is wary of direct contact with Iran and a US official said: "If Iran attends, we will have to look very closely at the seating plan."

General Henri Bentegeat, head of France's armed forces, said yesterday that Iran "presents a major worry because it is a country that has shown extremely bellicose intentions".

But Sergei Kiriyenko, head of the Russian atomic energy agency, remained hopeful of a solution. He said Iran was looking at a compromise put forward by Moscow under which its uranium enrichment would be carried out in Russia.

He said Tehran "considers our proposal extremely interesting and is prepared for detailed discussions".