Iran moving Europe funds in nuclear dispute

Embroiled in a nuclear stand-off with the West, Iran said yesterday it was moving funds out of Europe to shield them from possible UN sanctions and flexed its oil muscles with a proposal to cut Opec output.

"Yes, Iran has started withdrawing money from European banks and transferring it to other banks abroad," said a senior Iranian official, who asked not to be named.

Central Bank Governor Ebrahim Sheibani was quoted as saying Tehran had started shifting funds. But he sidestepped a question on whether the assets would go to Asian accounts.

Financial markets reacted nervously to the uncertainty about Iran's foreign holdings, estimated at more than $30 billion, helping send oil to a four-month high above $68. US stock prices fell and the dollar dipped against the euro and the safe-haven Swiss franc.

The US called the step an act of isolation. "I think it is an indication that Iran is further isolating itself from the rest of the world," State Department spokesman Sean McCormack said.

Although countries flouting UN sanctions would risk international condemnation, financial experts said some Asian countries, including Indonesia, Malaysia and Thailand, lack strong banking controls. This could allow Iran to disperse reserves into front companies and escape government intervention.

Lebanon and Switzerland were also cited as possible havens.

The US and the European Union want the International Atomic Energy Agency, at an emergency board meeting on February 2, to refer Iran to the UN Security Council for pressure including possible sanctions.

Swift action is considered unlikely, however.

Russia, China and India, with major commercial interests in the Islamic republic, have urged caution.

IAEA chief Mohamed ElBaradei has refused an EU request to hasten a report on Iran's atomic activities so it would be ready for the February 2 meeting, diplomats said.

Officials close to the IAEA said Mr ElBaradei also viewed as premature Western pressure to refer Iran to the Security Council. Diplomats said he had promised the Iranians they would have until the next regular IAEA board meeting on March 6 to increase access to nuclear sites and documents.

US lawmakers introduced a Senate resolution calling on the IAEA to refer the matter to the Security Council and urging Russia and China to support the efforts.

India, a nuclear weapons power with warming ties with Washington and an old friendship with Iran, advocated more talks between Tehran and the EU trio of France, Germany and Britain.

The EU3 scrapped the talks last week after Iran removed IAEA seals on uranium enrichment equipment and resumed a nuclear research program, which the West suspects is aimed at producing weapons. US and EU officials say Iran must reverse these steps for there to be more talks.

Iran, which is trying to avoid UN censure or sanctions, says its nuclear programme is entirely peaceful.

Talk of shifting foreign assets indicates Iran is taking the sanctions threat seriously, with bitter memories of its US assets being frozen after the 1979 Islamic revolution. Those funds are still in dispute.

But imposing sanctions is complicated, said an international financing expert. "There are a lot of regimes in the world that lack the power or capacity to freeze assets, even if they have the political will to do so," said the expert, who spoke on condition of anonymity because of the issue's sensitivity.