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Reuters
Aug 21 2012
Exclusive: Iran looks to Armenia to skirt bank sanctions
By Louis Charbonneau
UNITED NATIONS | Tue Aug 21, 2012 4:25pm EDT
(Reuters) - With international sanctions squeezing Iran, the Islamic
Republic is seeking to expand its banking foothold in the Caucasus
nation of Armenia to make up for difficulties in countries it used to
rely on to do business, according to diplomats and documents.
Iran's growing interest in its neighbor Armenia, a mountainous,
landlocked country of about 3.3 million people, comes at a time of
rising international isolation for Tehran and increasing scrutiny by
Western governments and intelligence agencies of Iranian banking ties
worldwide as they attempt to stifle the country's nuclear program.
The most recent example is British bank Standard Chartered (STAN.L),
which has been in the spotlight due to U.S. charges that it hid from
U.S. regulators and shareholders some $250 billion of transactions
tied to Iran.
An expanded local-currency foothold in a neighbor like Armenia, a
former Soviet republic which has close trade ties to Iran and is
working hard to forge closer links to the European Union, could make
it easier for Tehran to obfuscate payments to and from foreign clients
and deceive Western intelligence agencies trying to prevent it from
expanding its nuclear and missile programs.
Armenian officials denied illicit banking links to Iran. The country's
central bank issued a press release in response to this article,
stating that it requires all banks to scrutinize their transactions to
avoid dubious financial exchanges.
"The Central Bank of Armenia will follow its supervision over the
behavior and transactions of all financial institutions and their
customers in ... Armenia, in order to safeguard its financial system
from any destabilizing effects," it said.
While the four rounds of U.N. sanctions remain limited, with only two
Iran banks blacklisted by the Security Council, the United States and
European Union have implemented much tougher restrictions, sanctioning
dozens of banks and other firms and making it increasingly difficult
for Tehran to conduct business in U.S. dollars and euros.
A U.N. panel of experts that monitors compliance with the sanctions
against Tehran recently submitted a report to the U.N. Security
Council's Iran sanctions committee that concluded Iran was constantly
searching for ways to skirt restrictions on its banking sector.
"One state bordering Iran informed the Panel of requests from Iran to
open new financial institutions," the report said. "The requests were
not pursued apparently because of that country's burdensome
legislation."
Several U.N. diplomats familiar with the panel's work confirmed that
the unnamed state was Armenia, where Iran already has banking ties.
Despite Armenia's denials of illegal banking arrangements, Iran has
not given up trying to expand in the country, the diplomats said, and
U.S. officials have repeatedly cautioned Armenian colleagues to
tighten financial controls.
REPORTS AND DENIALS
Iran's trade with Armenia, including an oil pipeline that Armenian
news reports say should be finished in 2014, requires some form of
cross-border banking. Iranian President Mahmoud Ahmadinejad has said
that Iran's annual trade with Armenia is around $1 billion, according
to Iranian news reports.
Engaging in transactions with Iranian banks is not a violation of
international sanctions as long as it is not linked to Iran's nuclear
or missile programs or companies or individuals under U.S., EU or U.N.
sanctions.
Iran insists its nuclear program is peaceful and refuses to shut it
down. It says the sanctions are illegal.
But Washington has made clear to governments around the world that
trading with Iranian firms that are sanctioned by the United States
could lead to a U.S. blacklisting.
A Western intelligence report shown to Reuters, and dated May 2012,
said that Iran was searching for "convenient" locations to develop
alternative banking relationships away from spy agencies and other
international monitoring bodies. It said an expanded presence in
Armenia was one of Iran's goals.
"The Central Bank of Iran (CBI) has been operating for years to
establish and develop concealed infrastructures to enable Iran to
continue trading with foreign countries, particularly in countries
convenient for Iranian activity, such as the UAE (United Arab
Emirates) and Turkey," the report said.
"The increasing pressure on the banks in some of these countries has
forced CBI economists to seek financial alternatives in countries that
do not work according to the dictates of the West," it said, naming
Armenia as a target.
In addition to Turkey and UAE, diplomats say Iran has been trying to
develop financial channels elsewhere to avoid sanctions, focusing on
countries like Malaysia, China, India, Brazil and, according to a
report in the New York Times last weekend, Iraq.
Iran has used Iraqi banks to move large amounts of cash into the
international banking system, prompting private U.S. protests to
Baghdad, the Times reported.
Regarding Armenia, the Western intelligence report cited Armenian bank
ACBA Credit Agricole Bank, a full-service institution that does
business with individuals and companies and had some $574 million in
assets last year, as one of Iran's principal targets.
A Western U.N. diplomat who closely follows the sanctions on Tehran
confirmed that ACBA was "a bank that has come up in connection with
Iran." He declined to provide details of any potentially illicit ACBA
transactions linked to Iran.
Ashot Osipyan, chairman of the Union of Armenia's Banks, said it was
impossible ACBA had any ties with Iran. "Armenian banks are financing
only Armenia's economy," he said.
ACBA Chief Executive Officer Stepan Gishian was similarly categorical
in his denial of helping Iran skirt sanctions.
"We finance exclusively the economy of Armenia," he said. "We don't
have any relationship with Iran. We never have, we don't now and
furthermore we don't plan on becoming a channel for financing Iran.
What you're saying is complete nonsense."
The central bank statement said that "banks in the Republic of
Armenia, including 'ACBA-Credit Agricole Bank' CJSC, hold no
correspondent accounts with banks and financial institutions in the
Islamic Republic of Iran."
Washington recently raised its concerns with Armenian officials about
the possibility that Iran could exploit Armenia to bypass sanctions.
Secretary of State Hillary Clinton discussed the issue with President
Serzh Sargsyan during a June meeting in Yerevan, a senior State
Department official said.
The precise content of the discussions and the outcome were unclear.
CLAMP DOWN
Diplomats and intelligence officials told Reuters that Turkey and the
UAE remain Iran's principal banking connections, while China and India
are becoming areas of concern as Tehran now finds it difficult to
conduct transactions in U.S. dollars and euros. As a result, it has
turned increasingly to doing business in less-traceable local
currencies.
But Turkey and the UAE, they say, are not as welcoming these days. The
two countries are under intense pressure from Washington and the
European Union to clamp down on illicit Iranian commerce connected to
a nuclear program that the Western powers and their allies suspect is
for producing weapons - a charge Iran denies.
Another bank that has long concerned Western powers is the Armenian
branch of Iran's Bank Mellat, which has been under U.S. sanctions
since 2007. While Mellat is not under U.N. sanctions, the Security
Council cited it as a problematic bank in the text of its fourth
sanctions resolution, passed in June 2010.
"Over the last seven years, Bank Mellat has facilitated hundreds of
millions of dollars in transactions for Iranian nuclear, missile, and
defense entities," the resolution said.
Mellat is still functioning in Yerevan, though its activities have
drastically decreased due to U.S. and EU sanctions, according to
Arakel Meliksetyan, deputy head of the financial intelligence unit at
Armenia's central bank.
The central bank statement said that Mellat's Armenian assets
decreased more than 50 percent from $88 million to $40 million between
December 31, 2010 and July 1, 2012.
Mellat is cut off from the U.S., European and other financial markets
and has virtually no business with other Armenian banks, Meliksetyan
said. Since it was disconnected from the SWIFT system earlier this
year, Mellat Armenia is no longer able to send or receive
international wire transfers, he added.
He said the bank's small customers were mainly Iranians doing business
in Armenia, Armenians exporting to Iran, Iranians with Armenian
backgrounds and students.
The Mellat Armenian branch's website (www.mellatbank.am) has photos of
a brightly lit, ordinary-looking bank with the words "Accuracy,
Courtesy, Efficiency" at the top. It lists two men with Iranian names
as the general manager and deputy general manager and gives a P.O. box
for an address.
Reuters contacted the bank for responses to questions about its
activities. After initially agreeing to a face-to-face discussion, the
officials said they wanted written questions and have not provided
further comment.
Turkey was in a similar position to Armenia's once. Reuters reported
in 2010 that Turkey was becoming a safe haven for Iranian banks. In
response to heavy U.S. pressure to cut banking ties with Tehran,
Western envoys say, Turkish banks have become much more cautious about
doing business with Iranian clients.
U.S. concerns about Armenia's commitment to implementing sanctions
against Iranian banks are not new, according to previously secret U.S.
diplomatic cables published by WikiLeaks.
A May 2007 cable from the U.S. embassy in Yerevan, entitled "Armenia
Slow To Implement Bank Sepah Asset Freeze," said that Sepah, an
Iranian bank which has been under U.N. sanctions since March 2007,
maintained correspondent accounts with the Armenian branch of Mellat
in breach of U.N. restrictions.
Another cable from 2008 made clear Washington was still worried:
"Poloff (Political Office) requested that the Armenian MFA (ministry
of foreign affairs) advise the Central Bank of Armenia to employ extra
vigilance in monitoring the financial transaction of the Iranian owned
Bank Mellat in Yerevan."
(Additional reporting by Thomas Grove, Steve Gutterman and Nastassia
Astrasheuskaya in Moscow, Andrew Quinn in Washington, Hasmik Lazarian
in Yerevan and Andrei Makhovsky in Minsk. Editing by Warren Strobel
and Jim Loney)
http://www.reuters.com/article/2012/08/21/us-iran-sanctions-armenia-idUSBRE87K05420120821
Aug 21 2012
Exclusive: Iran looks to Armenia to skirt bank sanctions
By Louis Charbonneau
UNITED NATIONS | Tue Aug 21, 2012 4:25pm EDT
(Reuters) - With international sanctions squeezing Iran, the Islamic
Republic is seeking to expand its banking foothold in the Caucasus
nation of Armenia to make up for difficulties in countries it used to
rely on to do business, according to diplomats and documents.
Iran's growing interest in its neighbor Armenia, a mountainous,
landlocked country of about 3.3 million people, comes at a time of
rising international isolation for Tehran and increasing scrutiny by
Western governments and intelligence agencies of Iranian banking ties
worldwide as they attempt to stifle the country's nuclear program.
The most recent example is British bank Standard Chartered (STAN.L),
which has been in the spotlight due to U.S. charges that it hid from
U.S. regulators and shareholders some $250 billion of transactions
tied to Iran.
An expanded local-currency foothold in a neighbor like Armenia, a
former Soviet republic which has close trade ties to Iran and is
working hard to forge closer links to the European Union, could make
it easier for Tehran to obfuscate payments to and from foreign clients
and deceive Western intelligence agencies trying to prevent it from
expanding its nuclear and missile programs.
Armenian officials denied illicit banking links to Iran. The country's
central bank issued a press release in response to this article,
stating that it requires all banks to scrutinize their transactions to
avoid dubious financial exchanges.
"The Central Bank of Armenia will follow its supervision over the
behavior and transactions of all financial institutions and their
customers in ... Armenia, in order to safeguard its financial system
from any destabilizing effects," it said.
While the four rounds of U.N. sanctions remain limited, with only two
Iran banks blacklisted by the Security Council, the United States and
European Union have implemented much tougher restrictions, sanctioning
dozens of banks and other firms and making it increasingly difficult
for Tehran to conduct business in U.S. dollars and euros.
A U.N. panel of experts that monitors compliance with the sanctions
against Tehran recently submitted a report to the U.N. Security
Council's Iran sanctions committee that concluded Iran was constantly
searching for ways to skirt restrictions on its banking sector.
"One state bordering Iran informed the Panel of requests from Iran to
open new financial institutions," the report said. "The requests were
not pursued apparently because of that country's burdensome
legislation."
Several U.N. diplomats familiar with the panel's work confirmed that
the unnamed state was Armenia, where Iran already has banking ties.
Despite Armenia's denials of illegal banking arrangements, Iran has
not given up trying to expand in the country, the diplomats said, and
U.S. officials have repeatedly cautioned Armenian colleagues to
tighten financial controls.
REPORTS AND DENIALS
Iran's trade with Armenia, including an oil pipeline that Armenian
news reports say should be finished in 2014, requires some form of
cross-border banking. Iranian President Mahmoud Ahmadinejad has said
that Iran's annual trade with Armenia is around $1 billion, according
to Iranian news reports.
Engaging in transactions with Iranian banks is not a violation of
international sanctions as long as it is not linked to Iran's nuclear
or missile programs or companies or individuals under U.S., EU or U.N.
sanctions.
Iran insists its nuclear program is peaceful and refuses to shut it
down. It says the sanctions are illegal.
But Washington has made clear to governments around the world that
trading with Iranian firms that are sanctioned by the United States
could lead to a U.S. blacklisting.
A Western intelligence report shown to Reuters, and dated May 2012,
said that Iran was searching for "convenient" locations to develop
alternative banking relationships away from spy agencies and other
international monitoring bodies. It said an expanded presence in
Armenia was one of Iran's goals.
"The Central Bank of Iran (CBI) has been operating for years to
establish and develop concealed infrastructures to enable Iran to
continue trading with foreign countries, particularly in countries
convenient for Iranian activity, such as the UAE (United Arab
Emirates) and Turkey," the report said.
"The increasing pressure on the banks in some of these countries has
forced CBI economists to seek financial alternatives in countries that
do not work according to the dictates of the West," it said, naming
Armenia as a target.
In addition to Turkey and UAE, diplomats say Iran has been trying to
develop financial channels elsewhere to avoid sanctions, focusing on
countries like Malaysia, China, India, Brazil and, according to a
report in the New York Times last weekend, Iraq.
Iran has used Iraqi banks to move large amounts of cash into the
international banking system, prompting private U.S. protests to
Baghdad, the Times reported.
Regarding Armenia, the Western intelligence report cited Armenian bank
ACBA Credit Agricole Bank, a full-service institution that does
business with individuals and companies and had some $574 million in
assets last year, as one of Iran's principal targets.
A Western U.N. diplomat who closely follows the sanctions on Tehran
confirmed that ACBA was "a bank that has come up in connection with
Iran." He declined to provide details of any potentially illicit ACBA
transactions linked to Iran.
Ashot Osipyan, chairman of the Union of Armenia's Banks, said it was
impossible ACBA had any ties with Iran. "Armenian banks are financing
only Armenia's economy," he said.
ACBA Chief Executive Officer Stepan Gishian was similarly categorical
in his denial of helping Iran skirt sanctions.
"We finance exclusively the economy of Armenia," he said. "We don't
have any relationship with Iran. We never have, we don't now and
furthermore we don't plan on becoming a channel for financing Iran.
What you're saying is complete nonsense."
The central bank statement said that "banks in the Republic of
Armenia, including 'ACBA-Credit Agricole Bank' CJSC, hold no
correspondent accounts with banks and financial institutions in the
Islamic Republic of Iran."
Washington recently raised its concerns with Armenian officials about
the possibility that Iran could exploit Armenia to bypass sanctions.
Secretary of State Hillary Clinton discussed the issue with President
Serzh Sargsyan during a June meeting in Yerevan, a senior State
Department official said.
The precise content of the discussions and the outcome were unclear.
CLAMP DOWN
Diplomats and intelligence officials told Reuters that Turkey and the
UAE remain Iran's principal banking connections, while China and India
are becoming areas of concern as Tehran now finds it difficult to
conduct transactions in U.S. dollars and euros. As a result, it has
turned increasingly to doing business in less-traceable local
currencies.
But Turkey and the UAE, they say, are not as welcoming these days. The
two countries are under intense pressure from Washington and the
European Union to clamp down on illicit Iranian commerce connected to
a nuclear program that the Western powers and their allies suspect is
for producing weapons - a charge Iran denies.
Another bank that has long concerned Western powers is the Armenian
branch of Iran's Bank Mellat, which has been under U.S. sanctions
since 2007. While Mellat is not under U.N. sanctions, the Security
Council cited it as a problematic bank in the text of its fourth
sanctions resolution, passed in June 2010.
"Over the last seven years, Bank Mellat has facilitated hundreds of
millions of dollars in transactions for Iranian nuclear, missile, and
defense entities," the resolution said.
Mellat is still functioning in Yerevan, though its activities have
drastically decreased due to U.S. and EU sanctions, according to
Arakel Meliksetyan, deputy head of the financial intelligence unit at
Armenia's central bank.
The central bank statement said that Mellat's Armenian assets
decreased more than 50 percent from $88 million to $40 million between
December 31, 2010 and July 1, 2012.
Mellat is cut off from the U.S., European and other financial markets
and has virtually no business with other Armenian banks, Meliksetyan
said. Since it was disconnected from the SWIFT system earlier this
year, Mellat Armenia is no longer able to send or receive
international wire transfers, he added.
He said the bank's small customers were mainly Iranians doing business
in Armenia, Armenians exporting to Iran, Iranians with Armenian
backgrounds and students.
The Mellat Armenian branch's website (www.mellatbank.am) has photos of
a brightly lit, ordinary-looking bank with the words "Accuracy,
Courtesy, Efficiency" at the top. It lists two men with Iranian names
as the general manager and deputy general manager and gives a P.O. box
for an address.
Reuters contacted the bank for responses to questions about its
activities. After initially agreeing to a face-to-face discussion, the
officials said they wanted written questions and have not provided
further comment.
Turkey was in a similar position to Armenia's once. Reuters reported
in 2010 that Turkey was becoming a safe haven for Iranian banks. In
response to heavy U.S. pressure to cut banking ties with Tehran,
Western envoys say, Turkish banks have become much more cautious about
doing business with Iranian clients.
U.S. concerns about Armenia's commitment to implementing sanctions
against Iranian banks are not new, according to previously secret U.S.
diplomatic cables published by WikiLeaks.
A May 2007 cable from the U.S. embassy in Yerevan, entitled "Armenia
Slow To Implement Bank Sepah Asset Freeze," said that Sepah, an
Iranian bank which has been under U.N. sanctions since March 2007,
maintained correspondent accounts with the Armenian branch of Mellat
in breach of U.N. restrictions.
Another cable from 2008 made clear Washington was still worried:
"Poloff (Political Office) requested that the Armenian MFA (ministry
of foreign affairs) advise the Central Bank of Armenia to employ extra
vigilance in monitoring the financial transaction of the Iranian owned
Bank Mellat in Yerevan."
(Additional reporting by Thomas Grove, Steve Gutterman and Nastassia
Astrasheuskaya in Moscow, Andrew Quinn in Washington, Hasmik Lazarian
in Yerevan and Andrei Makhovsky in Minsk. Editing by Warren Strobel
and Jim Loney)
http://www.reuters.com/article/2012/08/21/us-iran-sanctions-armenia-idUSBRE87K05420120821