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Top U.S. Treasury Official In Europe For Talks On Sanctioning Iranian Central Bank

The Iranian Central Bank building in Tehran
The Iranian Central Bank building in Tehran
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By Golnaz Esfandiari
"Iran needs to be held accountable for this plot."

That is the message being delivered this week in Europe by David Cohen -- the U.S. undersecretary of the treasury for terrorism and financial intelligence and the man responsible for overseeing sanctions against Iran -- in the wake of an alleged plot by the Persian Gulf country to assassinate Saudi Arabia's ambassador on U.S. soil.

His first stop was London, where Cohen met with British officials on October 24 to discuss potential new sanctions against Iran in response to the plot.

From there, Cohen is taking his message to Berlin, Paris, and Rome.

The potential sanctions would target the heart of Iran's financial dealings, the Central Bank of Iran (CBI), in a move that analysts suggest could have a crippling effect on the country's economy by cutting off nearly all international financial transactions.

Cohen said in London on October 24 that the sanctions would be part of the broader effort to deter Iran from pursuing nuclear capabilities. "We are going to continue to look at those financial institutions that are involved with proliferation activity for Iran and continue to try to isolate them from the international financial sector," he said.

Iran has denied any involvement in the alleged bomb-attack plot, announced by the United States on October 11, and dismissed the allegations as "meaningless."

Iran Resigned To A Strong Response

But Tehran also appeared resigned that a strong response is coming, with Iranian Foreign Minister Ali Akbar Salehi saying on October 18 that "Iran is facing the toughest political and economic sanctions in the past 32 years."

Cohen's European tour could determine whether Washington's push to blacklist the CBI has the necessary international support.

U.S. Undersecretary for Terrorism and Financial Intelligence David Cohen
U.S. Undersecretary for Terrorism and Financial Intelligence David Cohen
The European Union last week imposed sanctions against five individuals believed to be connected to the plot, and has warned of further steps against Iran if it fails to address concerns about its nuclear program.

During an October 13 hearing of the U.S. Senate Committee on Banking, Cohen stressed the importance of expanding U.S. sanctions already in place. "Although U.S. financial institutions are already generally prohibited from doing business with any bank in Iran, including the CBI, further U.S. action against the CBI, if it attained multilateral support, could further isolate the CBI, with a potentially powerful impact on Iran," he said.

Paris-based professor of international economic relations and Iranian economic expert Fereidoun Khavand believes targeting Iran's Central Bank, which he described as the country's "main artery" to the outside world, would be a milestone in U.S. actions against Iran.

Curtailing Iran's Financial Dealings

"It would be the last step before sanctioning Iran's oil exports," he says. "Therefore, a U.S. move against the Central Bank would be a serious jump in the long process of tensions between Tehran and Washington."

Such a step, if implemented, would have a crippling effect on Iran's economy, which relies on oil profits for as much as 80 percent of its foreign-exchange revenues.

Paris-based Iranian economist Fereidoun Khavand
Paris-based Iranian economist Fereidoun Khavand
According to Khavand, if the CBI is sanctioned, the country's financial dealings with the rest of the world will become very expensive, because Iran would have to resort to irregular transactions for oil deals.

"It doesn't mean that Iran's connections to the world would be fully cut off," he adds. "But the cost for Iran's financial dealings with the world would increase significantly."

Western sanctions against the CBI could lead to a dramatic increase in oil prices, which could have a potentially damaging effect on global markets. This, in turn, could hurt the United States and its allies, who are struggling to bring the global recession under control.

Political Bluff Or A Serious Threat?

That seems to be one of the reasons some Iranian officials have dismissed the U.S. threat as a "political bluff" and an attempt to divert U.S. public opinion from the financial crisis.

Iranian officials have publicly downplayed the threat of sanctions against the CBI, claiming that Iran has programs to counter the measure.

Last month, Central Bank Governor Mahmoud Bahmani said any government that tried to sanction the bank would be "the laughingstock of the world."

Outside the official view, some in Iran are expressing concern about the prospect of new sanctions.

Jamshid Pajouyan, an Iranian economist known as the theoretician of subsidy cuts and the head of the Competition Council, said last week that Iran should take the threat of sanctions against the CBI "seriously."

The difficult part for the United States if it decides to move ahead and sanction the Central Bank would be to get others on board, particularly countries like China, which buys oil from Iran.

Former State Department Middle East intelligence official Wayne White told RFE/RL that the United States would have to convince countries that the alleged plot was very serious and that Washington is in possession of very indisputable facts surrounding the case.

"The group that would most likely participate [in the sanctions] are the closest allies of the United States -- obviously the U.K., Japan also very likely, and some of the continental powers such as France," White said.

"But as far as the Chinese and the Russians are concerned, rule them out. Doing this is contrary to their considerable interests in Iran, and the U.S. has never been able to share with them the extent of the intelligence it shares with its very, very closely guarded ally group."

Washington announced last week that it has dispatched interagency teams to a number of countries, including Russia, China, and Turkey, to provide more details about the plot.
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by: Ali
October 26, 2011 13:59
Thank you for this comprehensive report. I am not a fan of the Islamic Republic but I think the US shouldn't take measures that would hurt the Iranian people.

by: Ed from: Sydney, Australia
October 29, 2011 03:04
Diplomacy and international relationships are a murky area for starters and the information we get at the end of the food chain, to say the least, time and time again, has been proved either inaccurate or perhaps erroneous?
From what we see reported by the press, or alternative media, which is all we can go on currently, and indeed what has occurred are all very disturbing where world peace is in the balance. Although it would be very hard to understand fully what indeed is going on, we are already at war, which from all the signs seem to be in full escalation mode. In looking back not so many years ago we can equate these actions and sanctions being taken against Iran paralleling the same actions taken against the Japanese by Woodrow Wilson prior to Pearl Harbour. There was a clear intent to bring the Japanese into WWII.
Similarly, in fully engaging diplomatically with Iran on an economic sanction level while Iran pursues its nuclear arms ambitions; ambitions being fuelled by their sale of oil to China and Russia. Not to mention of course its outright support for Islamic totalitarian and oppressive regimes in the name of peace loving Islam, whereby everyone in the world today tastes the bitter fruit thereof.
The war has indeed begun everyone, whether you accept it or not as the civilised world will never stand by again accepting the threats and rhetoric from any fundamentalist ideologues. I omit China and Russia as civilised as my interpretation of the word "civilised" is the acknowledgement of social justice, human rights, democracy and the rule of law which is the great divider of the good guys and bad guys! Not Islam against Jews and Christianity as they would have you believe. Yet it is true most fundamentalist and moderate Arabs/Islamic countries use the "anti -Semitic Jewish propaganda thing" to prop up their pathetic arguments which any normal thinking person can see it’s emptiness and transparency of perpetual hate being generated by the so called peaceful islamists.
Today’s wars do not discriminate against civilians, Ali, as we can plainly see what has happened since 9/11 and beyond to the Arab uprisings of recent months and continuing which the Arabic individuals involved have so cowardly demonstrated. To end on a positive note Ali and I am assuming you are a Muslim enjoy our freedoms in the west, but if your sympathies or actions are rooted still in Sharia and Islamic laws contradicting the values and decency we uphold here, take heed that you are fast approaching the boundary of our collective democratic tolerance.

by: eli
November 04, 2011 11:23
Well now they've backed off, as putting sanctions on the CBI is now seen as too risky for its potential effect on oil prices: http://www.latimes.com/news/nationworld/world/la-fg-us-iran-20111104,0,6106373.story

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