Wall Street Journal: Banks in the United Arab Emirates have curtailed financial dealings with a handful of Iranian banks blacklisted by the U.S. Treasury, officials here said, drying up one of Iran’s financial lifelines amid tightening international sanctions aimed at curbing Tehran’s nuclear ambitions.
The Wall Street Journal
Middle Eastern County’s Move Follows Malaysia’s Clampdown, Reflecting Growing Adherence to U.S. Treasury’s Blacklist
By CHIP CUMMINS in Dubai and JAY SOLOMON in Washington
DUBAI—Banks in the United Arab Emirates have curtailed financial dealings with a handful of Iranian banks blacklisted by the U.S. Treasury, officials here said, drying up one of Iran’s financial lifelines amid tightening international sanctions aimed at curbing Tehran’s nuclear ambitions.
Washington has pushed many of Iran’s Persian Gulf neighbors to close off financial access to Tehran’s banks. The U.A.E.’s move is especially significant since Dubai has in recent years been an important re-export hub for Iranian importers, prohibited by previous sanctions from importing goods directly from the U.S. and elsewhere.
Stuart Levey, the U.S. Treasury’s point man on sanctions, traveled in late August to the U.A.E., Bahrain and Lebanon to meet with officials and explain Washington’s new financial-sanctions law.
Mr. Levey said he found a “new seriousness” among Middle East banking institutions in cooperating with the international banking sector over Iran sanctions. “I have found a real and intense interest, especially [among] financial institutions” in the region, he said in a telephone interview during the trip.
Malaysia also recently suspended the local unit of Iran’s second-largest bank, Bank Mellat, which the U.S. and the United Nations said was involved in facilitating “millions of dollars” in transactions aimed at advancing Iran’s nuclear program. Kuala Lumpur followed Japan and South Korea in suspending or closing Bank Mellat operations.
Bank Mellat officials have denied engaging in illicit business and have told Iranian state-owned media that the U.S. has never provided any evidence to back its claims. Earlier this year, the bank’s chairman, Ali Divandari, said Mellat’s foreign-exchange reserves had doubled from a year earlier, despite the American sanctions.
The moves make the U.A.E. and Malaysia the latest in a growing list of countries that have started enforcing financial penalties against Iran in accordance with or beyond those mandated by the U.N. Security Council in June. The U.S. has blacklisted 17 Iranian banks for alleged involvement in supporting Iran’s nuclear program and international terrorist activities. Iranian officials say the sanctions are unjustified, but that they won’t hurt Iran’s economy, in any case. U.S. officials have pushed other governments to join in shunning them.
Earlier this week, Abdul Rahim Al Awadi, head of the U.A.E. central bank’s anti-money laundering unit, confirmed publicly that the country had frozen some Iranian accounts in accordance with the June U.N. sanctions. But the country has also long enjoyed significant commercial ties with Iran, and in the past, it hasn’t gone beyond U.N.-mandated measures.
“U.A.E. banks abide by U.N. sanctions,” a senior U.A.E. central bank official said in response to emailed questions. But he added that, in addition, “they have stopped dealing with sanctioned Iranian banks on the U.S. list.” The official declined to comment further.
Several executives at large banks in Dubai and Abu Dhabi, the two largest emirates of the seven that make up the U.A.E., declined to comment on their policy toward Iranian banks. A banking executive at one of the U.A.E.’s largest banks said commercial payments and transfers with some Iranian banks are still taking place, but the bank is being “very vigilant” on all Iranian transactions. The executive declined to comment further.
An Iranian trader based in Dubai said his U.A.E.-based bank refused to transfer money from Dubai into an Iranian bank account last month. The amount, he said, was less than $10,000.
The U.A.E. central bank hasn’t specifically ordered banks to fall in line with U.S. sanctions, officials here said. But last month, the central bank asked banks to report cash transfers to Iran, making it clear it was ratcheting up scrutiny.
The bank has also provided U.A.E. banks with an explanation of new, unilateral U.S. sanctions enacted in July. The U.S. measures specifically target foreign banks doing significant business with U.S.-blacklisted Iranian banks and threaten them with sanctions.
“It’s not like you’re telling the banks, ‘don’t do business with Iran,’ ” said another U.A.E. official. “You’re telling banks, ‘here’s the [U.S.] law.’ “
Last week, Iranian money changers blamed a steep depreciation of the Iranian rial on a lack of hard currency at banks and money-exchange outlets, with some citing new difficulty in accessing funds from the U.A.E. At one point, the rial fell more than 10%, but has since stabilized.
It isn’t clear how much the currency rout had to do with U.A.E. cash transfers. But banks and money-exchange traders in Iran and the U.A.E.—as well as elsewhere in the Persian Gulf—have long traded currencies relatively freely. The U.A.E., in particular Dubai, has established itself as a financial hub for the Middle East.
The U.A.E. has had to balance its alliance with Washington and the West—along with its strategic worry over a nuclear-armed Iran—against significant commercial ties with Iran dating back centuries.
Dubai, in particular, has maintained close trade ties with Iran. Generations of Iranian immigrants have settled in the city-state, perched just across the Persian Gulf.
While reliable trade data are difficult to come by, the government of Dubai said in a bond-market prospectus last month that Iran was the second-largest re-export market for goods coming from Dubai, after India. That has triggered heightened scrutiny from U.A.E. authorities as well, officials here said.
Last year, U.A.E. authorities searched and confiscated 24 containers in eight instances where inspectors found U.N.-prohibited items heading to Iran, said a U.A.E. official familiar with the seizures. So far this year, there have been six seizures, involving 14 containers.
Late last month, acting on intelligence from the U.K., U.A.E. authorities offloaded and searched 65 containers that British officials suspected contained electrical transformers that can be used in nuclear facilities, this official said. The inspection took three days, but inspectors didn’t find any illicit goods and released the ship.
The U.S. Treasury has increasingly looked toward Asia as a major center for Iranian financial activity, as European banks have shown a willingness to sever their ties to Tehran.
Malaysia, home to one of the world’s largest Islamic banking centers, has been one area of concern, said U.S. officials. Japan, South Korea and China—all major buyers of Iranian oil—have been others.
Last November, the U.S. Treasury blacklisted Bank Mellat’s wholly owned Malaysia unit, the First East Export Bank, based in the offshore financial center of Labuan. The U.S. has accused Mellat of moving “millions of dollars for Iran’s nuclear program” and separately blacklisted the bank’s chairman, Mr. Divandari. In June, the U.N. also sanctioned First East Export Bank for its alleged role in aiding Tehran’s nuclear program.
A senior Malaysian official said last week that Kuala Lumpur moved to “suspend” FEEB’s activities in order to bring his country in line with U.S. and U.N. sanctions. He said his government was still waiting for more information from the U.S. on exactly which activities the FEEB has engaged in that violated international law.
“We are engaging the Americans on this,” said the Malaysian official. “We’re saying: Show us exactly what they’ve done wrong.”
—Margaret Coker, Nour Malas and Mirna Sleiman in Dubai contributed to this article.