Sunday, 25 November 2007

Washington Tightens Financial Noose on Iran

Sanctions virtually duplicate those used against North Korea

A key reason why North Korea walked out on the September 2005 agreement reached at the six-party talks in Beijing was the economic fallout from accusations that the Macau-based Banco Delta Asia (BDA) was helping to launder funds and find a safe haven for the ill-gotten gains of the Pyongyang regime.

The BDA bombshell was dropped as negotiators were congratulating themselves for reaching the Sept. 19, 2005 Joint Statement for the verifiable denuclearization of North Korea. The deal was reached in the second phase of the 4th round of talks that first began back in August, 2003. It was quite an achievement.

Original article published by Ohmynews International

However, feeling they had been betrayed by Washington over the BDA issue, the North pulled out of the pact, and continued work on its nuclear programs with renewed vigor. They eventually tested their first device in October 2006.

Legitimate businesses in the North Korean capital, many of them owned and operated by Europeans, vigorously protested the freezing of some $25 million of their money in accounts held by the BDA after the U.S. Treasury blacklisted the bank.

To date, Washington has never provided any incontrovertible and independently verified proof that BDA was an active participant in any illegal activity. The actions against the small family-owned bank were just part of wider efforts by the U.S. Treasury to financially isolate the North.

The premise being, that a combination of regular sanctions and financial isolation would provide a coup de grace to an already crippled economy. The goal, obviously, was regime change or submission to U.S. demands by the Pyongyang government.

The lengthy blacklisting of the BDA, plus extensive pressure applied by the United States on other banking institutions around the world to sever their links with North Korea did indeed leave Pyongyang economically isolated. North Korean leader Kim Jong Il didn't visibly get any thinner, but certainly the general population felt the bite of the sanctions.

How close the North came to total financial collapse we shall probably never know, because an agreement very similar to the 1994 Agreed Framework was eventually accepted by the six-party negotiators, Washington, Pyongyang, Seoul, Tokyo, Beijing and Moscow.

In February 2007 negotiators in Beijing managed to thrash out a deal that would lead to the eventual denuclearization of North Korea in return for substantial benefits, not least of which was the carrot of diplomatic recognition by the United States and removal from the State Department list of state sponsors of terrorism.

Part of the deal involved the return of funds frozen in the Banco Delta Asia to account holders. The Beijing deal had been struck by the State Department, and it quickly became apparent that the Treasury Department were unhappy with the terms.

However, after a series of what appeared to be carefully choreographed delays and "unexpected obstacles" -- by June 2007 the funds were eventually made their tortuous journey from Macau to Russia , via a specially selected clearing bank in the United States.

The delaying tactics almost derailed the entire process, with North Korea declining to fulfill its part of the bargain until the funds were released. For several months the whole process hung in the balance over a mere $25 million.

U.S. Treasury never provided any substantiated evidence against the Banco Delta Asia, on the contrary, independent audits and investigations found the bank innocent of any wrongdoing.

Was this a failure in economic intelligence gathered by Treasury agents, or a deliberate attempt to drive North Korea to the brink, and beyond?

As the United States and now Great Britain ratchet up their diplomatic pressure on Tehran , many of the same accusations are being made. The U.S. Treasury has accused Iran 's Saderat Bank of laundering money for Lebanon 's Hezbollah and Islamic Jihad groups.

The latest round of unilateral sanctions imposed on Iran by Washington on October 25th aimed to sever Tehran 's links to the international banking network. The country's three largest banking groups were named in the sanctions: Bank Mellat and Bank Melli were accused of involvement in Iran 's nuclear program, while Saderat was designated as a terrorist financier.

Obviously, the sanctions targeting Iran are not dissimilar to those that were initiated against Pyongyang. According to the U.S. Treasury's undersecretary for terrorism and financial intelligence, Stuart Levey, they measures are already having a significant effect.

Levey described a "dramatic pullback in business" as financial institutions cut their ties with Tehran.

Notwithstanding generally positive reports from the International Atomic Energy Agency regarding Iran's nuclear programs, Washington and its European allies remain insistent that Teheran immediate cease the enrichment of uranium. This despite the fact this process is perfectly legal under the international atomic protocols signed by Tehran and verified by the atomic energy watchdog.

With the current U.N. and unilateral sanctions imposed by Washington, Levey said Iran is "turning itself into a financial pariah" through deceptive financial practices.

Targeted sanctions, like those against banks are supposed to have minimal effect on the general population. However, experience has shown quite the opposite.

Small businesses, such as those producing hygiene products or basic pharmaceuticals often cannot pay for goods and services. Consequently, production falters and a shortage of these essential items develops.

In addition, without access to the international banking system, companies have to become creative. Bypassing normal banking channels can often lead to further accusations of money laundering and other irregularities. Targeted sanctions against banks invariably create more problems than they solve.

However, along with verifiable evidence that Tehran has ambitions to develop nuclear weapons, the world is waiting to see any smoking gun regarding the financial malpractice of the Iranian banks.

Given Washington's past record on intelligence gathering regarding the so-called "axis of evil" -- Iraq, North Korea and Iran -- one can only draw the conclusion that this is most likely either another failure in intelligence, or just a pathetically disguised act of blatant aggression.

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