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Iranian bank shrugs off cost of US sanctions

Saturday, Jan 05, 2008

Unilateral sanctions by the US have cost Iran's Bank Saderat a third of its foreign partners but its overseas operations remain profitable, according to the institution's managing director.

In an interview with the Financial Times, Hamid Borhani said that of 600 foreign banks that used to do business with Bank Saderat before the US imposed sanctions in September 2006, some 200 had halted their transactions. The bank is the second largest domestically in terms of assets and probably the most active Iranian bank outside the country.

Mr Borhani said that Middle Eastern banks were continuing contacts and becoming the institution's top foreign partners, as sanctions shifted trade from west to east. China became Iran's main trade partner last year, while much trade is being conducted through the re-export hub of the United Arab Emirates.

"It is customers who determine which direction the bank should go," Mr Borhani said.

However, according to recent figures from Bankers' Almanac, which provides reference information for the industry, the number of Saderat 's correspondent banks has declined from 29 in August 2006 to eight, two of which are Saderat subsidiaries. Correspondent banks are banks that agree to perform services for other banks in inaccessible markets.

"The trend line is in the right direction but it hasn't yet gone to zero, where it should be," said a senior US official.

Western officials also said that Saderat might be a -target of the next round of United Nations sanctions, although the US has failed to persuade Russia and China to sign up to measures.

Mr Borhani said the bank's 25 operations outside the country, including a subsidiary in London, Washington's closest ally, continued their operations. He estimated profits were up about 25 per cent in 2007, compared with a 30 per cent rate of growth the previous year.

Washington has taken action twice against Bank Saderat over the past 15 months. It amended regulations in September 2006 to exclude the bank from the US financial system and subsequently designated it as a "supporter of terrorism" last October.

The US administration has lobbied for banks and companies in other countries to stop doing business with the Iranian institutions it has targeted.

Mr Borhani, however, insisted that his bank was managing the pressure and remained determined to keep overseas branches running because there were no signs of losses being made.

He said sanctions would not stop the bank's forthcoming privatisation. Nor had it prevented development plans, particularly the introduction of electronic and internet banking.

US claims that Saderat funded radical groups were baseless, he said. The London-based Bank Saderat , which holds strategic investments, and the bank's five branches in Lebanon had never transferred money to militant groups, as the US alleges.

He challenged Washington to reveal its documentation and reply to the three letters he had sent to the Treasury's Office of Foreign Assets Control along with documents, in one case exceeding 1,000 pages.

By NAJMEH BOZORGMEHR and DANIEL DOMBEY

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