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China’s banks at risk from Iran deals, says US official

China’s banks at risk from Iran deals, says US official

Beijing: Iran is increasingly looking for access to global financial markets to fund its nuclear programme, a top US Treasury official said on Wednesday, urging Chinese regulators and banks to be prepared to block transactions and impede Iran’s efforts.

David Cohen, the US Treasury’s under secretary for terrorism and financial intelligence, said Beijing took seriously its responsibilities to uphold UN Security Council resolutions on Iran, but reminded Chinese banks to implement tougher safeguards.

“China has strictly implemented the provisions of the Security Council resolution that require specific steps, but it has not taken any steps that are similar to what some of these other jurisdictions have done to deal with the risk of Chinese financial institutions engaging in financial transactions with Iranian financial institutions," Cohen said.

Tehran’s refusal to halt enrichment has provoked four rounds of UN sanctions on the world’s No. 5 oil exporting state and tighter US and European Union restrictions.

Iran has insisted countries recognize its right to enrich uranium, which it says it wants to fuel power plants. The Western states say enriched uranium could be used to make a bomb, and the demand is an unacceptable precondition for talks.

Cohen was speaking to reporters in Beijing, where he has been meetings with Chinese Ministry of Foreign Affairs and Ministry of Finance officials.

The Beijing leg of Cohen’s trip followed a visit to Hong Kong, where he sought to impress upon international banks, including the big four state-owned Chinese banks, the need to protect themselves from Iranian shell companies seeking to finance the country’s nuclear programme.

The US Treasury has said a provision embedded in 2010 UN sanctions on Iran calls on member states to cut off bank services to any Iranian institution if they could contribute to the development of Iran’s nuclear programme.

Cohen said such transactions could “entangle the Chinese bank in transactions that would be terribly damaging to their reputation and contrary to the international effort to impede the Iranian nuclear program and to put pressure on Iran to bring it back to the negotiating table".

Legal action

In Hong Kong, where he emphasized the need to prevent shipping companies and exporters from doing business with Iran’s national carrier, the Islamic Republic of Iran Shipping Lines, Cohen said he got a “very positive reception".

“The government authorities there are as motivated to ensure that illicit actors don’t abuse the system there as anyone," he said.

Part of his message to bankers was a recap of the impact of 2010 US legislation - the Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA) - that tries to dissuade foreign financial institutions from doing business with sanctioned Iranian firms by threatening to cut them off from the US market.

“I think the teeth are quite sharp," Cohen said, adding that Chinese financial firms were “as much in jeopardy as a bank anywhere else of being the subject of a CISADA action".

But Cohen said there is “no disagreement whatsoever between the US and the Chinese" that Iran’s nuclear programme is out of compliance with the non-proliferation treaty and a series of Security Council resolutions.

Chinese foreign ministry spokesman Hong Lei said that Beijing has always implemented Security Council resolutions conscientiously, but also had a right to trade with Iran, China’s third-largest oil supplier.

“China’s normal business relations with Iran do not violate any Security Council resolutions nor undermine the interests of other countries in the international community," he said.

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