U.S. lawmakers are calling on the European Union to "immediately" prevent Iran from using its cross-border payment system, known as Target2, to prevent the country from circumventing sanctions, Bloomberg reported.
"We strongly urge you to take all necessary measures to immediately cut off Iran's ability to use its foreign-held euros by prohibiting direct or indirect access to Target2 services by or on behalf of accounts owned or controlled by the government of Iran or its affiliates," the lawmakers wrote in a letter yesterday to EU President Herman Van Rompuy and European Central Bank President Mario Draghi.
U.S. lawmakers are concerned that Iran is converting its foreign-held euros into local currencies, which "in turn free up significant funds to finance Iranian imports, stabilize Iran's monthly budget and allows the regime to continue to engage in sanctionable and illicit activities," according to the letter obtained by Bloomberg News after it was circulated by Senators Jeanne Shaheen, a New Hampshire Democrat, and Mark Kirk, an Illinois Republican.
The letter was signed by at least 35 senators, including a majority of members of the banking and foreign relations committees, according to a Senate aide who asked not to be identified because the letter hasn't been announced.
The 27-nation EU bans transactions with Iranian banks apart from some pre-approved payments including those relating to food and medicine.
The assets of at least three Iranian banks have been frozen as part of a list of sanctioned people and entities considered to be providing support to the Islamic Republic's government.
Sanctions have been imposed on Iran partly out of concern that it is seeking to develop nuclear-weapons capability, allegations its government denies.
The ECB said on Feb. 21 that no payments that contravene sanctions on Iran are cleared via Target2.
While information available on the ECB's website shows that four Iran-based banks have a total of six branches registered in the ECB's database of financial institutions, they may not be eligible to receive refinancing loans from the central bank.
"Though we recognize and appreciate the narrow mandate by which the ECB operates and respect the independence of this institution, we believe we all have a role to play in ensuring that Iran does not obtain a nuclear weapon," the U.S. lawmakers said.
"It is critical that the U.S. and Europe present a strong, unified front with respect to Iran's nuclear program."