New York Times: The United States pressed the top finance officials of the worlds leading industrial nations on Saturday to crack down on what Treasury Secretary Henry M. Paulson Jr. said was the exploitation of their banking systems by at least 30 Iranian front companies involved in illicit activities. The New York Times
By STEVEN R. WEISMAN
SINGAPORE, Sept. 16 The United States pressed the top finance officials of the worlds leading industrial nations on Saturday to crack down on what Treasury Secretary Henry M. Paulson Jr. said was the exploitation of their banking systems by at least 30 Iranian front companies involved in illicit activities.
Mr. Paulson said he told the finance and economic ministers that the front companies had been identified by American intelligence agencies as conducting international financial transactions using banks in Europe and elsewhere, many of them blue chip banks.
Iran is a country that has broad, deep and commercial relationships with much of the world that have gone on for some time, Mr. Paulson told reporters. This was nothing more than an educational briefing to prepare financial institutions for dealing with some of the risks that are out there.
The Treasury chiefs comments came after he met with his counterparts from Britain, France, Germany, Italy, Canada, Japan and the European Union, who had come for the annual gathering of the World Bank and the International Monetary Fund.
They appeared to reflect the emerging Bush administration strategy on Iran as efforts to impose sanctions on Iran by the United Nations Security Council have faltered.
The administration charges that Iran has a secret nuclear weapons program, a charge that Iran denies. Iran is also accused of transferring funds to Hezbollah and other Islamic militant organizations through regular commercial banks.
What administration officials call a major escalation in the effort to squeeze Iran economically occurred last week when the Treasury Department announced that Bank Saderat, a major bank in Iran, would no longer have even indirect access to the United States financial system.
The new decree means that Iran will have difficulty selling anything, including oil, for dollars through Bank Saderat, according to banking experts, because any commercial exchange that uses dollars normally obtains the dollars from an American bank. Many banking experts say the administration may name other banks as off-limits soon.
After the announcement on Bank Saderat, two senior Treasury officials visited Europe to try to persuade regulators and banks to stop doing business with Bank Saderat and any other banks that are alleged to be involved in illicit activities such as funneling money to groups the United States considers terrorist. Some European banks have already curtailed their activities with Iran, but many leading banks have refused.
Stuart Levey, under secretary of the Treasury for terrorism and financial intelligence, visited Britain, France, Switzerland, Italy and Germany, and the deputy treasury secretary, Robert Kimmitt, went to Germany. France, Italy and Germany have extensive commercial relations with Iran and its trading companies.
The Treasury department has declined to name the banks they met with.
Mr. Paulson said many leading trading companies in Iran with legitimate business operations were also involved in the illicit activities, and that it behooved any legitimate bank to realize that it was risky to continue doing even legitimate business with them.
He called on banks around the world to be vigilant in opposing such risks and to avoid inadvertently facilitating the kinds of activities that they wouldnt want to facilitate.
Iran was only one of many subjects in Mr. Paulsons meetings with the finance ministers. Also on the agenda was a discussion of the world economy, which Mr. Paulson said had grown in recent years at rates that he and others had not seen in a generation. Despite that, he acknowledged risks arising from the failure of recent global trade talks, high energy prices and the problem of what are called economic imbalances.
That phrase is a euphemism for a broad set of problems, including the fact that the United States imports much more than it exports and has thus become the worlds leading debtor, owing hundreds of billions of dollars to China, Japan and other trading partners. The United States says this problem can be remedied by the trading partners importing more from the United States and also by China allowing its currency to rise in value in relation to the dollar, thereby making exports to the United States more expensive.
In a statement Saturday, the finance ministers of the leading industrial countries said, Greater exchange rate flexibility is desirable in emerging economies with large current-account surpluses, especially China.
The United States also appeared to be making headway in its drive to overhaul the International Monetary Fund, the global agency that rescues countries from insolvency. The Bush administration wants to give more voice at the fund to China and other developing countries and also to poor countries, at the expense of some countries in Europe.
Some Europeans resent the move, but they appeared to be going along with it in principle, and American officials said they were increasingly hopeful that the overhaul would be approved by 85 percent of the votes from 184 countries on Monday.