Four of Europe's biggest European banks have started to curb their activities in Iran, even before the UN Security Council decides on a resolution to impose economic sanctions on Iran over nuclear ambitions, according to the New York Times.

The report, which points out the importance of letter of credit (L/C) business with Iran, suggests, however, that trade finance between Iran and its major trading partners may not be too adversely affected.

Persuasive tactics

US officials have been trying to persuade banks in the US, in Europe and in the Middle East to limit their activities, citing anti-terrorism and banking laws to bolster their arguments and apparently with some success.

"We are seeing banks and other institutions reassessing their ties to Iran. They are asking themselves if they really want to be handling business for entities owned by a government engaged in the proliferation of weapons of mass destruction and support for terrorism," under secretary of the US Treasury for terrorism and financial intelligence, Stuart Levey, told the paper.

European banks

The New York Times says four European banks - UBS and Credit Suisse of Switzerland, ABN Amro of the Netherlands and London-based HSBC - have made varying levels of disclosure about the limits of their activities in Iran in the past six months.

Most large European banks have US offices subject to American laws - and the US authorities do prosecute banks for dealing with countries that Washington wants to isolate. UBS was fined US$100 million for unauthorised transactions involving entities in Iran, Libya and Yugoslavia, while ABN Amro was fined US$80 million for non-compliance with anti-money laundering rules and breaching sanctions imposed on Libya and Iran.

Limited trade impact

Trade finance with Iran is not, however, likely to be to badly affected even if other banking activities are curbed according to the New York Times.

It points out that companies from Iran's largest trading partners - Japan, China, Italy, Germany and France - use several banks to finance L/Cs to export machinery, commodities and other goods to Iran.

Experts have told the paper that it would be difficult to bar banks from financing trade deals with Iran.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.