Chinese banks cut back business with Iran -paper

TEHRAN (Reuters) - Chinese banks have cut back business with Iranian banks due to U.S. pressure over Tehran's nuclear programme, an Iranian Foreign Ministry official was quoted on Saturday as saying.

The United States, which is leading efforts to isolate the Islamic Republic over activities which Washington fears are ultimately aimed at making bombs, has urged international banks and companies to stop dealing with or investing in Iran.

Many Western banks have either halted transactions with Iranian customers or reduced business with them sharply.

But China has expanded commercial ties with Iran in recent years and has been reluctant to impose tough economic sanctions on Tehran. Iran says its nuclear programme is a peaceful drive to produce energy.

"Because of America's pressure, China's banking system has cut its cooperation with Iranian banks for four months now," the Etemad daily quoted Deputy Foreign Minister Mahdi Miraboutalebi as saying, without giving details.

It was not clear whether all or just certain transactions had been halted and Iranian officials were not immediately available for comment.

Asadollah Asgaroladi, the head of the Iran-China chamber of commerce, said in early December that Iranian traders had faced difficulties in opening letters of credit with Chinese banks, restricting a vital instrument in trade.

Saturday's Etemad report said Asgaroladi had called China's banking action unacceptable and an Iranian delegation would visit China in order to remove such business obstacles.

CHINA OIL IMPORTS SURGING

China has become an increasingly important trading partner with Iran as expanding U.N. and U.S. sanctions over the nuclear activities have encouraged Western businesses to scale back dealings with the Islamic Republic.

During a visit to Tehran late last year, Chinese Foreign Minister Yang Jiechi was quoted as saying Beijing wanted to boost ties with Iran further.

In 2007, Iran was China's third-largest supplier of crude oil, with volumes rising by 22.4 percent from the previous year.

But one Iranian analyst said that if China was forced to choose between the United States and Iran, it would opt for the former as Beijing's U.S. business ties were far more extensive than those with Iran.

"It is a diplomatic and a political problem," Saeed Laylaz said. "If they have to choose they will choose Washington."

Laylaz said the problem with letters of credit was likely to affect trade between Iran and China. "It will be more difficult ... especially to import."

China and the four other permanent members of the United Nations Security Council as well as Germany agreed last month on a draft new sanctions resolution against Iran over its refusal to halt the sensitive atomic work.

The draft, a watered down version of what Washington wanted because of resistance from Beijing and Moscow, calls for extended freezing of assets and travel bans on specific Iranian officials. But it falls far short of the kind of tough measures the United States wanted imposed on Iranian banks.

Iran, which has made windfall gains from the high oil price on world markets, has repeatedly shrugged off the impact of sanctions on the country's economy and says it will not bow to Western pressure and halt its nuclear programme.