* Iran increasingly isolated, feeling sting of sanctions
* Diplomats: Iran interested in expanding banking in Armenia
* UAE, Turkey still key for Iran banks, but less welcome
* Armenia denies illicit banking links to Iran
(Adds statement by Armenian central bank on Reuters story)
By Louis Charbonneau
UNITED NATIONS, Aug 21 With international
sanctions squeezing Iran, the Islamic Republic is seeking to
expand its banking foothold in the Caucasus nation of Armenia to
make up for difficulties in countries it used to rely on to do
business, according to diplomats and documents.
Iran's growing interest in its neighbor Armenia, a
mountainous, landlocked country of about 3.3 million people,
comes at a time of rising international isolation for Tehran and
increasing scrutiny by Western governments and intelligence
agencies of Iranian banking ties worldwide as they attempt to
stifle the country's nuclear program.
The most recent example is British bank Standard Chartered
(STAN.L), which has been in the spotlight due to U.S. charges
that it hid from U.S. regulators and shareholders some $250
billion of transactions tied to Iran. [ID:nL6E8JD5PT]
An expanded local-currency foothold in a neighbor like
Armenia, a former Soviet republic which has close trade ties to
Iran and is working hard to forge closer links to the European
Union, could make it easier for Tehran to obfuscate payments to
and from foreign clients and deceive Western intelligence
agencies trying to prevent it from expanding its nuclear and
Armenian officials denied illicit banking links to Iran. The
country's central bank issued a press release in response to
this article, stating that it requires all banks to scrutinize
their transactions to avoid dubious financial exchanges.
"The Central Bank of Armenia will follow its supervision
over the behavior and transactions of all financial institutions
and their customers in ... Armenia, in order to safeguard its
financial system from any destabilizing effects," it said.
While the four rounds of U.N. sanctions remain limited, with
only two Iran banks blacklisted by the Security Council, the
United States and European Union have implemented much tougher
restrictions, sanctioning dozens of banks and other firms and
making it increasingly difficult for Tehran to conduct business
in U.S. dollars and euros.
A U.N. panel of experts that monitors compliance with the
sanctions against Tehran recently submitted a report to the U.N.
Security Council's Iran sanctions committee that concluded Iran
was constantly searching for ways to skirt restrictions on its
"One state bordering Iran informed the Panel of requests
from Iran to open new financial institutions," the report said.
"The requests were not pursued apparently because of that
country's burdensome legislation."
Several U.N. diplomats familiar with the panel's work
confirmed that the unnamed state was Armenia, where Iran already
has banking ties.
Despite Armenia's denials of illegal banking arrangements,
Iran has not given up trying to expand in the country, the
diplomats said, and U.S. officials have repeatedly cautioned
Armenian colleagues to tighten financial controls.
REPORTS AND DENIALS
Iran's trade with Armenia, including an oil pipeline that
Armenian news reports say should be finished in 2014, requires
some form of cross-border banking. Iranian President Mahmoud
Ahmadinejad has said that Iran's annual trade with Armenia is
around $1 billion, according to Iranian news reports.
Engaging in transactions with Iranian banks is not a
violation of international sanctions as long as it is not linked
to Iran's nuclear or missile programs or companies or
individuals under U.S., EU or U.N. sanctions.
Iran insists its nuclear program is peaceful and refuses to
shut it down. It says the sanctions are illegal.
But Washington has made clear to governments around the
world that trading with Iranian firms that are sanctioned by the
United States could lead to a U.S. blacklisting.
A Western intelligence report shown to Reuters, and dated
May 2012, said that Iran was searching for "convenient"
locations to develop alternative banking relationships away from
spy agencies and other international monitoring bodies. It said
an expanded presence in Armenia was one of Iran's goals.
"The Central Bank of Iran (CBI) has been operating for years
to establish and develop concealed infrastructures to enable
Iran to continue trading with foreign countries, particularly in
countries convenient for Iranian activity, such as the UAE
(United Arab Emirates) and Turkey," the report said.
"The increasing pressure on the banks in some of these
countries has forced CBI economists to seek financial
alternatives in countries that do not work according to the
dictates of the West," it said, naming Armenia as a target.
In addition to Turkey and UAE, diplomats say Iran has been
trying to develop financial channels elsewhere to avoid
sanctions, focusing on countries like Malaysia, China, India,
Brazil and, according to a report in the New York Times last
weekend, Iraq. [ID:L2E8JI1WX]
Iran has used Iraqi banks to move large amounts of cash into
the international banking system, prompting private U.S.
protests to Baghdad, the Times reported.
Regarding Armenia, the Western intelligence report cited
Armenian bank ACBA Credit Agricole Bank, a full-service
institution that does business with individuals and companies
and had some $574 million in assets last year, as one of Iran's
A Western U.N. diplomat who closely follows the sanctions on
Tehran confirmed that ACBA was "a bank that has come up in
connection with Iran." He declined to provide details of any
potentially illicit ACBA transactions linked to Iran.
Ashot Osipyan, chairman of the Union of Armenia’s Banks,
said it was impossible ACBA had any ties with Iran. "Armenian
banks are financing only Armenia’s economy," he said.
ACBA Chief Executive Officer Stepan Gishian was similarly
categorical in his denial of helping Iran skirt sanctions.
"We finance exclusively the economy of Armenia," he said.
"We don’t have any relationship with Iran. We never have, we
don’t now and furthermore we don’t plan on becoming a channel
for financing Iran. What you’re saying is complete nonsense."
The central bank statement said that "banks in the Republic
of Armenia, including 'ACBA-Credit Agricole Bank' CJSC, hold no
correspondent accounts with banks and financial institutions in
the Islamic Republic of Iran."
Washington recently raised its concerns with Armenian
officials about the possibility that Iran could exploit Armenia
to bypass sanctions. Secretary of State Hillary Clinton
discussed the issue with President Serzh Sargsyan during a June
meeting in Yerevan, a senior State Department official said.
The precise content of the discussions and the outcome were
Diplomats and intelligence officials told Reuters that
Turkey and the UAE remain Iran's principal banking connections,
while China and India are becoming areas of concern as Tehran
now finds it difficult to conduct transactions in U.S. dollars
and euros. As a result, it has turned increasingly to doing
business in less-traceable local currencies.
But Turkey and the UAE, they say, are not as welcoming these
days. The two countries are under intense pressure from
Washington and the European Union to clamp down on illicit
Iranian commerce connected to a nuclear program that the Western
powers and their allies suspect is for producing weapons - a
charge Iran denies.
Another bank that has long concerned Western powers is the
Armenian branch of Iran's Bank Mellat, which has been under U.S.
sanctions since 2007. While Mellat is not under U.N. sanctions,
the Security Council cited it as a problematic bank in the
text of its fourth sanctions resolution, passed in June 2010.
"Over the last seven years, Bank Mellat has facilitated
hundreds of millions of dollars in transactions for Iranian
nuclear, missile, and defense entities," the resolution said.
Mellat is still functioning in Yerevan, though its
activities have drastically decreased due to U.S. and EU
sanctions, according to Arakel Meliksetyan, deputy head of the
financial intelligence unit at Armenia's central bank.
The central bank statement said that Mellat's Armenian
assets decreased more than 50 percent from $88 million to $40
million between D ec. 31, 2010 an d J uly 1, 2012.
Mellat is cut off from the U.S., European and other
financial markets and has virtually no business with other
Armenian banks, Meliksetyan said. Since it was disconnected from
the SWIFT system earlier this year, Mellat Armenia is no longer
able to send or receive international wire transfers, he added.
He said the bank's small customers were mainly Iranians
doing business in Armenia, Armenians exporting to Iran, Iranians
with Armenian backgrounds and students.
The Mellat Armenian branch's website (www.mellatbank.am) has
photos of a brightly lit, ordinary-looking bank with the words
"Accuracy, Courtesy, Efficiency" at the top. It lists two men
with Iranian names as the general manager and deputy general
manager and gives a P.O. box for an address.
Reuters contacted the bank for responses to questions about
its activities. After initially agreeing to a face-to-face
discussion, the officials said they wanted written questions and
have not provided further comment.
Turkey was in a similar position to Armenia's once. Reuters
reported in 2010 that Turkey was becoming a safe haven for
Iranian banks. In response to heavy U.S. pressure to cut banking
ties with Tehran, Western envoys say, Turkish banks have become
much more cautious about doing business with Iranian clients.
U.S. concerns about Armenia’s commitment to implementing
sanctions against Iranian banks are not new, according to
previously secret U.S. diplomatic cables published by WikiLeaks.
A May 2007 cable from the U.S. embassy in Yerevan, entitled
"Armenia Slow To Implement Bank Sepah Asset Freeze," said that
Sepah, a n Iranian bank which has been under U.N. sanctions since
March 2007, maintained correspondent accounts with the Armenian
branch of Mellat in breach of U.N. restrictions.
Another cable from 2008 made clear Washington was still
worried: "Poloff (Political Office) requested that the Armenian
MFA (ministry of foreign affairs) advise the Central Bank of
Armenia to employ extra vigilance in monitoring the financial
transaction of the Iranian owned Bank Mellat in Yerevan."
(Additional reporting by Thomas Grove, Steve Gutterman and
Nastassia Astrasheuskaya in Moscow, Andrew Quinn in Washington,
Hasmik Mkrtchyan in Yerevan and Andrei Makhovsky in Minsk.
Editing by Warren Strobel and Jim Loney)
Keywords: IRAN SANCTIONS/ARMENIA
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