EU Levies Sanctions on Iran

Peter Crail

The European Union agreed June 23 to impose a new set of sanctions against Iranian individuals and organizations involved in Iran’s nuclear and missile programs. The new sanctions go beyond the measures contained in UN Security Council Resolution 1803, adopted in March, applying restrictions to persons and entities not designated by the resolution. Last year, the EU similarly adopted stricter measures than those required by two earlier council resolutions.

Resolution 1803 required all states to undertake efforts to prevent Iran from financing or procuring technology for its nuclear and missile programs. (See ACT, April 2008. )

Chief among the new sanctions was an assets freeze on Iran’s largest bank, Bank Melli, which will be required to close its offices in Hamburg, London, and Paris. Under the EU legislation, the 27-country group sanctioned Bank Melli for “providing or attempting to provide” support for firms associated with Iran’s nuclear and missile programs. Resolution 1803 called on but did not require states to “exercise vigilance” regarding their business with Iranian banks, in particular Bank Melli and Bank Saderat.

The EU has not taken similar steps against Bank Saderat, Iran’s second largest bank. A British diplomat explained to Arms Control Today June 27 that Resolution 1803 listed Bank Saderat for its financial connections to terrorist organizations, but the EU action was aimed only at entities engaged in proliferation, which include Bank Melli. The United States imposed financial restrictions on both banks in October 2007. (See ACT, November 2007. )

In addition to Bank Melli, the EU placed similar restrictions on 12 other entities, nearly all of which are Iranian defense firms. The EU also placed assets freezes and travel bans on 14 senior Iranian officials holding leadership positions in key military organizations and the Atomic Energy Organization of Iran, which oversees Iran’s nuclear program.

A German diplomat told Arms Control Today June 19 that the EU had been waiting on the delivery of a revised proposal for negotiations by the five permanent members of the Security Council (China, France, Russia, the United Kingdom, and the United States) and Germany before adopting new sanctions (see page 37). The six countries have characterized the incentives offer and the UN sanctions as a “dual-track strategy” in which sanctions place pressure on Iran to comply with international demands while benefits are offered as part of a comprehensive package to resolve concerns about Iran’s nuclear ambitions.

The diplomat further noted that, given the poor prospect of winning new support from China and Russia for additional UN sanctions on Iran in the near future, Western states will focus on ensuring the effective implementation of the three resolutions already adopted by the council, citing the lack of capacity of many states to control the export of the types of technologies listed under the sanctions.

The EU sanctions follow a visit to several European countries by President George W. Bush during which the trans-Atlantic strategy on Iran was a major topic for discussion. Following a June 10 U.S.-EU summit, the participants issued a declaration agreeing “to take steps to ensure Iranian banks cannot abuse the international banking system to support proliferation and terrorism.”

Iran has been wary of the increasing Western pressure on its financial institutions. According to the Iranian weekly Shahrvand-e Emrooz June 16, Tehran has moved about $75 billion worth of financial assets out of European banks in an effort to mitigate the economic impact of strengthened financial sanctions by the West.

Iranian officials appeared to have confirmed this financial shift recently. Mohsen Talaei, Iran’s deputy foreign minister for economic affairs, told reporters June 11 that Iran’s foreign exchange assets were in a “secure position now, ” adding that “part of Iran’s assets in European banks have been converted to gold and shares and another part has been transferred to Asian banks.”