May 13, 2011 | Quote

Iran ‘Increasingly Cut Off’ From Financial Markets: UN Report

Financial sanctions are impeding Iran’s purchase of materials for its nuclear and missile programs, a United Nations report said, compelling the government in Tehran to try to buy foreign banks and adopt methods employed by terrorist groups.

“Iranian individuals and entities find themselves increasingly cut off from international financial markets, making it increasingly difficult to find ways to pay in U.S. dollars or euros for the equipment they need,” according to the report by a panel of experts created by the UN Security Council.

The eight-person panel, established by a June 2010 UN resolution, said that while Iran “appears able” to pay for materials to support the banned programs, the sanctions “appear to be having an impact as judged by the range of measures taken by Iran to circumvent them.”

Those measures include 10 reported attempts to buy foreign banks, money exchange bureaus and other financial institutions in the past two years and efforts to “set up new banking relationships overseas, for example in parts of South America,” the report said.

The UN Security Council has adopted four sets of sanctions against Iran aimed at preventing it from developing nuclear weapons or ballistic missiles. The U.S. and European Union have added their own sanctions. The report said it was impossible to distinguish between the effects of the sanctions regimes.

Iran’s mission to the UN didn’t respond to a request for a comment on the report. The country says its nuclear program is for peaceful purposes.

Shifting Banks

Iranian financial transactions, “which used to be largely centered on the Gulf, appear to have shifted in recent years to neighboring countries” the report said. Iran also has moved accounts to non-sanctioned banks from sanctioned banks such as Bank Sepah, funneled payments through foreign exchange bureaus and intermediary banks, and used methods associated with money laundering or terrorist financing.

As an example of the difficulties Iran faces, the report said six Islamic Republic of Iran Shipping Lines vessels were seized in Hong Kong, Malta and Singapore as a result of difficulties accessing financial services. “Repossessing the ships forced Iran to draw on valuable foreign currency reserves,” the report said.

Sanctions are “slowing Iran’s nuclear program but not yet having an impact on the decision calculus of its leadership,” the report said. UN member nations are taking a “more active role” in sanctions enforcement by strengthening export controls, and monitoring their ports and financial institutions, it said. These efforts have compelled Iran to buy materials that fall “just below control thresholds,” requiring the government to adapt purchased goods to the nuclear and missile programs.
Prohibited Shipments

The report said Iran has made prohibited shipments of conventional arms to Syria, specifically in six of nine reported incidents in the past two years. In all, the report documented 12 cases of banned weapons or goods intercepted on their way to or from Iran.

“Iran willfully violates Security Council prohibitions on such transfers,” the report said.

The panel recommended that the Security Council designate six more people and entities to the list that is subject to the UN asset freeze and travel ban.