Cutting Off Iran's Cash Flow

The dinosaur media isn't covering it much, but unilateral US sanctions against Iran are already having an effect.

Since the US has now blacklisted Iran's three main banks and the world's financial system flows through New York, most of the world's financial institutions are simply not doing business with Iran any longer, for fear of US retaliation.This is the same tactic used by the Bush Administration against Hamas...only with far more success, since Hamas essentially has no banking institutions of its own.

"Practically all the major European banks have ceased their cooperation with Iran," said an official from Iran's Export Development Bank, who asked not to be named.

"It is no longer possible to wire money by dollar into Iran and for the payments in euro there are just three European banks. They could stop cooperating with us at any moment," the official said.

British-Asian bank HSBC and the huge Swiss banks UBS and Credit Suisse have already cut all ties and cooperation with Iran and Deutsche Bank, Commerzbank and BNP Paribas cut all ties this year.

This is important, because the Iranian rial is toilet paper in the international currency market, and everything Iran imports has to be paid for in dollars or Euros.

Asian banks from countries like South Korea and China that still trade with Iran have also been imposing restrictions on doing business with the mullacracy.

"The big banks from China, one of Iran's most important partners, are now refusing to deal with Iran as they have important interests in the United States and fear reprisals," said Mehrdad Mahmoudi, a leading currency dealer.

Foreign banks are refusing to accept letters of credit drawn on Iranian banks or even to do simple wire transfers.

"Iranian banks can still use the services of small Asian banks or the Persian Gulf but that will not last forever," said Bijan Khajepour, director of Atieh Consulting in Tehran.

"Firms are increasingly having to pay in cash or go through a third country to import their goods which will make the finished product even more expensive," he said.

Strangely enough, one banking conduit that appears to not be cooperating is the World Bank, which has an almost $1 billion dollar loan to the Mullahs in the pipeline ready to be sent to Iran.

The president of the World Bank, Robert Zoellick refused a request from congressman Mark Kirk,(R-IL)who serves on the appropriations subcommittee that funds the World Bank to suspend the loans.Considering that the US is using its banking leverage to get other countries to stop financial dealings with Iran, Zoellick and the World bank appear to be deliberately undercutting US strategy, and one has to wonder why.

Zoellick's predecessor, Paul Wolfowitz certainly wouldn't have done it.

For now those loans remain up in the air as the appropriations committe and its chairperson, Nita Lowey ( D-NY) make a decision on whether to block the American portion of the funds or not. Knowing Congresswoman Lowey, I'd say there's a better than even chance. And if the US decides to block its portion of the funding, the Japanese, the EU and perhaps even the Saudis, who are the other donors, may too.

Meanwhile, the UN Security Council is debating a third round of sanctions agianst Iran....stay tuned...