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Iran looks to Armenia to skirt bank sanctions

Armenian officials deny illicit banking links to Iran

Gulf News

United Nations: 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 neighbour 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 programme.

The most recent example is British bank Standard Chartered, which has been in the spotlight due to US charges that it hid from US regulators and shareholders some $250 billion (Dh918 billion) of transactions tied to Iran.

An expanded local-currency foothold in a neighbour 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 missile programmes.

Armenian officials denied illicit banking links to Iran.

While the four rounds of UN 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 US dollars and euros.

A UN panel of experts that monitors compliance with the sanctions against Tehran recently submitted a report to the UN Security Council’s Iran sanctions committee that concluded Iran was constantly searching for ways to skirt restrictions on its banking sector.

“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 UN 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 US 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 programmes or companies or individuals under US, EU or UN sanctions.

Iran insists its nuclear programme 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 US 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.

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 principal targets.

A western UN 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.”

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.