International Herald Tribune: Despite public embarrassment and pressure from the United States, German officials appear to be at a loss for ways to prevent a bank in Germany from being used by India to pay for Iranian oil, money that U.S. officials say could help finance Iran’s nuclear weapons program.
The International Herald Tribune
By JACK EWING
FRANKFURT — Despite public embarrassment and pressure from the United States, German officials appear to be at a loss for ways to prevent a bank in Germany from being used by India to pay for Iranian oil, money that U.S. officials say could help finance Iran’s nuclear weapons program.
German officials said they had no legal basis to block the payments, made by India to the Hamburg-based Europäisch-Iranische Handelsbank, or E.I.H. The money flows through the German central bank, the Bundesbank, as part of the international payments system.
The payments have apparently been going on for a few weeks, but attracted public attention in Germany only this week, after a report in a leading German business newspaper, Handelsblatt.
The U.S. authorities have been pressing Germany to shut down the conduit, while the German authorities say they cannot do so without strong evidence that E.I.H. has violated U.N. sanctions against supplying the Iranian weapons program.
Last September, the U.S. Treasury accused E.I.H. of handling payments for Iranian weapons development, including $3 million in 2007 used to purchase material for Iranian missile programs, and said it had acted as an intermediary for several Iranian banks with close ties to the government. The Treasury department added E.I.H. to its list of so-called designated banks whose activities are blocked.
The bank has called the charges “politically driven” and “without substance.”
Around the same time, the European Union froze the assets of dozens of companies and people, including several banks, deemed to be involved in supporting the Iranian nuclear weapons program or helping the country evade sanctions. E.I.H. was not on the list, however, and the E.U. regulations did not ban payments for Iranian oil and natural gas.
The U.S. Treasury has argued that E.I.H. provided financial services to several institutions on the E.U. list, which went into force in October. One was Bank Mellat in Tehran, which an E.U. document said “engages in a pattern of conduct which supports and facilitates Iran’s nuclear and ballistic missile programs.”
The bank said in its 2009 annual report that Bank Mellat and Bank of Industry and Mine, also based in Teheran, each owned more than 25 percent of E.I.H. shares. It did not identify any other owners. The U.S. Treasury has included both banks on a list of institutions that are controlled by the government of Iran.
“Treasury is concerned about recent reports that the German government authorized the use of E.I.H. as a conduit for India’s oil payments to Iran,” said a U.S. Treasury official who spoke on customary condition of anonymity. “Treasury will continue to engage with both German and Indian authorities about this situation, and will continue to work with all our allies to isolate E.I.H.”
Privately, the United States has threatened to fine institutions that do business with E.I.H. or other banks on its blacklist. It was not clear whether the German authorities were making a concerted effort to add E.I.H. to the E.U. list, a step that would require approval by other E.U. members.
As things now stand, German officials say they have no grounds to block payments. The bank has a German banking license and officials say they fear a court challenge if they constrain its activities without ample evidence of wrongdoing.
“This institution is not listed” under E.U. sanctions, Andreas Peschke, a spokesman for the foreign ministry, said Monday during a news conference in Berlin. “Therefore there is no legal basis to block its business activities.”
The Bundesbank also said it had no choice. “If an account holder of the German Bundesbank instructs it to carry out a payment that is allowed by the regulations of the European Union, the Bundesbank is obligated to carry out this transaction,” the bank said in a statement.
A woman who answered the phone at E.I.H., and declined to give her name, said the bank would have no comment beyond a statement it issued in September after the bank was officially blacklisted by the U.S. authorities.
E.I.H. said then that it did not do business with banks blacklisted by the U.S. government and that it complied with United Nations resolutions on Iran, which include an embargo on equipment that could be used to develop nuclear weapons.
Indian officials were quoted in Indian news media this month as saying that they were clearing payments for Iranian oil through the Bundesbank. Attempts to reach a spokesman at the Ministry of Finance on Wednesday were unsuccessful.
India depends on Iran for about 15 percent of its crude oil imports. But in December, when the Indian central bank, responding to U.S. pressure, blocked the government from using the Asian Clearing Union to handle the transactions, the government no longer had a way to pay for the fuel. The clearing union was established by the United Nations in the 1970s to ease commerce between Asian nations. The Indian government immediately began looking for a new payment route, settling on E.I.H. and the European financial system.
While Germany has not cut off E.I.H. payments, it closely monitors the bank’s activities, Steffen Seibert, a spokesman for the German chancellor, Angela Merkel, said Monday.
Two regulators are constantly present at the bank and the institution is required to report transactions of more than €10,000, or $14,000, with Iranian individuals or organizations to Bundesbank overseers, and get authorization for transactions or more than €40,000. Any transactions that might violate U.N. sanctions against Iran would not be authorized, Mr. Seibert said.
A spokesman for the German government, Rüdiger Petz, said Wednesday that he could not comment on whether the regulators had blocked any payments from India.
Mr. Peschke, the foreign ministry spokesman, added, “The German government is naturally very aware of the sensitivity of this problem.”
