Reuters: Europe has no right to freeze Iran’s overseas assets and would spark a damaging capital flight from European banks if it did so, Iran said on Thursday, sending another ominous warning about the impact of possible sanctions. 
TEHRAN (Reuters) – Europe has no right to freeze Iran’s overseas assets and would spark a damaging capital flight from European banks if it did so, Iran said on Thursday, sending another ominous warning about the impact of possible sanctions.
Tehran faces referral to the U.N. Security Council, where it could face economic sanctions over suspicions that it is seeking an atomic bomb. Iran denies the charge.
The prospect of sanctions has revived bitter memories of the freezing of Iran’s U.S. assets shortly after the 1979 Islamic revolution.
Responding to recent reports about the need to repatriate Iranian money in case Iran’s holdings are impounded by countries including those of the European Union, Economy Minister Davoud Danesh-Jafari told the official IRNA news agency:
“Global regulations do not allow Europe to do so and it would be damaging for them to.”
He added: “Such acts would make oil-rich countries anxious to transfer their capital out of European banks into safer places.”
Danesh-Jafari has previously warned that U.N. sanctions could send oil prices to levels beyond what industrialised economies could accept.
The idea of economic sanctions has already proved unwelcome to China which wants the matter settled outside of the world body. Beijing is reliant on Iran’s oil and is a veto-wielding permanent Security Council member.
Iran is the world’s fourth biggest oil producer.
Germany, the biggest exporter to Iran, has said it would prefer a measure such as travel restrictions on Iranian politicians to economic sanctions.
Central Bank Governor Ebrahim Sheibani said on Wednesday that Iran would repatriate its assets held abroad should that prove to necessary.
It is unclear how much of Iran’s copious oil wealth is kept in foreign accounts. The Naftiran Intertrade Company (NICO), the trade and financing arm of the state oil company, is based in Switzerland.
Economists estimate Iran will have earned more than $40 billion from oil by the end of the 12 months to March 2006. Of this, $16 billion goes straight to budgeted government spending.
The rest goes to the Central Bank of Iran which keeps an unknown amount of holdings in foreign accounts.
