IMF pressured to suspend Iran, close account

Business Materials 1 May 2012 15:23 (UTC +04:00)

A New York-based advocacy group that has pressured companies and organizations to halt business with Iran because of its disputed nuclear program is urging the International Monetary Fund to close its account at Iran's central bank and suspend Iran as a member, Business Week reported.

Mark Wallace, president of United Against Nuclear Iran, a group whose founders include current and former administration officials, has sent a letter to IMF managing director Christine Lagarde criticizing the IMF's relationship with Iran, according to a copy provided to Bloomberg. Iran's central bank, also known as Bank Markazi, has been sanctioned by the U.S. and the European Union.

Wallace's group is attempting to open a new front in efforts to isolate Iran and pressure it to give up its uranium enrichment activities and to cooperate more fully with the International Atomic Energy Agency. The IMF's chief spokesman, William Murray, said the Fund isn't violating any laws and is following its normal rules toward member nations.

"We call on the IMF to suspend Iran from its membership in the IMF, and, if it refuses to comply with its international treaty obligations, then it should expel Iran from membership," Wallace, a former U.S. ambassador to the United Nations under President George W. Bush, said in an interview.

Wallace's letter links Iran's central bank to financing for "Iran's illicit nuclear program, its sponsorship of global terror and its brutal repression of the Iranian people." The letter quotes President Barack Obama, who on Feb. 6 cited "deceptive practices" by Iran's central bank in hiding transactions and failing to prevent money laundering, and notes the European Union Council on Jan. 23 froze Iran's central bank assets under European control.

The U.S. and EU have adopted dozens of new financial, trade, insurance and energy-related sanctions since November to squeeze Iran's economy and force its leaders to abandon any illicit aspects of their nuclear program. The U.S., EU and Israel say Iran is seeking the capability to produce a nuclear weapon. Iran says its program is for civilian energy and medical purposes.

Wallace's April 26 letter asserts the IMF holds more than $1 billion in cash and securities at Iran's central bank, and calls upon the institution to close any accounts, return any U.S. money that might be involved and "comply with relevant U.S. and EU law."

IMF officials insist the fund isn't violating any laws, and say they are obligated by IMF rules to hold every member's contribution to the IMF in that nation's central bank. A country's IMF quota is an amount based on a member state's relative position in the world economy and determines its maximum financial commitment to the IMF.

The IMF says Iran's quota is the equivalent of $2.25 billion in Iranian currency, the rial, and officials say the account hasn't been touched for decades.

"The IMF's holdings of each member's currency are maintained with the central bank of the relevant member, including Iran. There is nothing in the EU or U.S. sanctions regimes that is inconsistent with these arrangements," said Murray.

IMF officials disputed the accuracy of Wallace's letter. Murray said there are no securities or dollars in the IMF quota held at Iran's central bank, and said the IMF makes no deposits or withdrawal involving that quota. The IMF has no projects in Iran and no U.S. government money has been used there by the fund, he said.

According to IMF records, Iran has had no transactions with the IMF since Jan. 1, 1984.

Murray indicated that any decision to suspend or expel any member would be determined by member countries, not by the IMF's managing director.

Contacted yesterday for comment, the U.S. Treasury Department and the EU said the IMF, as an international organization, is exempt from U.S. and EU sanctions on Iran's central bank.

John Sullivan, a U.S. Treasury Department spokesman, said a law enacted on Dec. 31 that sanctions foreign financial institutions that conduct transactions with Iran's central bank doesn't include international financial institutions such as the World Bank and the IMF.

Moreover, Sullivan said, "Simply holding central bank of Iran reserves -- but not transacting with the CBI -- would not likely be seen as conducting any 'significant financial transaction,'" as prohibited by the new law.
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Wallace dismissed the IMF's defense, saying that holding money in an account in Iran's central bank is in itself "a transaction of business." It's wrong, he said, for an international organization to "operate as business as usual, pretending that holding an account at a sanctioned entity" isn't a problem.

"The IMF faces a legal conundrum that can have only one resolution," he said. If the fund can't withdraw Iran's quota and place it in another financial institution, "it should suspend its membership," at least until Iran abandons any illicit aspects of its nuclear program.

United Against Nuclear Iran is a non-partisan group whose founders include Dennis Ross, President Barack Obama's chief adviser on Iran till late last year, and Gary Samore, who works at the White House on nuclear non-proliferation.

When they joined the administration, Ross and Samore left the advisory board, whose members include former CIA Director James Woolsey and former Israeli intelligence chief Meir Dagan.

Edited by: S. Isayev