US urges Europe to boost Iran sanctions

By Stephen Fidler in London

Financial Times

Published: February 8 2007

The US on Wednesday night voiced its growing frustration over the failure of European governments to toughen financial sanctions on Iran over its nuclear programme.

Differences over the sanctions between Washington and European governments threaten to open a new transatlantic division over how to deal with Tehran’s nuclear ambitions, which have until now been papered over.

Gregory Schulte, the US ambassador to the International Atomic Energy Agency, the United Nations nuclear watchdog, went public with Washington’s complaints, saying the Europeans should do more. He drew attention to European export credit agencies that provide billions of dollars a year in help to Iran for the finance of imports.

“Faced by the defiance of Iran’s leadership, the European Union and European countries can do more – and should do more – to bolster our common diplomacy. Why, for example, are European governments using export credits to subsidise exports to Iran? Why, for example, are European governments not taking more measures to discourage investment and financial transactions?” he said in a speech drafted for delivery in Munich last night.

Since a United Nations resolution in December that mandated sanctions on Iran – including a ban on financing for 10 named companies said to be linked to missile and nuclear programmes – the US has expanded its own financial sanctions.

These include barring one bank from dealing in dollars. The US alleges the state-owned Bank Sepah, which is not named in the UN resolution, has helped finance weapons programmes and Washington has passed a dossier to European governments that it says supports its case. The US also took action last September against Bank Saderat for its alleged involvement in terrorist financing.

European officials expect that Washington will follow up with unilateral action against other financial institutions.

But US pressure on the EU to follow suit has met resistance, with Europe saying it does not have the right mechanisms for taking such action and expressing fears that the extra sanctions would be overturned by courts.

In spite of the lack of official European enthusiasm for the US proposals, several European private banks have announced they would curb their dealings with Tehran.

Mr Schulte said Europe should use “the full range of non- military measures at its disposal” to direct political, economic, communications and other non-military pressure at Iran’s leadership and those who influenced them.

His remarks suggested that bolstering economic and financial sanctions against Iran could avoid military action, which the US has refused to rule out.

The US and many western governments believe Iran’s nuclear programme is aimed at developing a weapon, but Iran has repeatedly asserted that its programme is for civil purposes.