Girlfriday Rice To Companies: Cut Tehran Links Now

October 12, 2007
Matthew Swibel
Forbes


Moscow -- Secretary of State Condoleezza Rice issued a blunt warning Friday to businesses with any ties to Iran: get out or face harsh penalties. "Parties are taking reputational and financial risk by doing business with Iran," she said, during a news conference following intense diplomacy between U.S. and Russian ministers. "Under American law, we will sanction them."

Her finger-pointing and terse ultimatum followed criticism of U.S. policy by Russian Foreign Minister Sergey Lavrov, who suggested unilateral measures "undermine and impede" other ongoing talks between Iran and both the International Atomic Energy Agency and E.U. foreign policy chief Javier Solana.

Rice pledged continued support for such efforts, but noted Iran's "continued defiance is concerning." Then she used the occasion to spotlight a year-old, backstage push by Rice's State Department and Henry Paulson's Treasury Department to ostracize Iran using the international financial system.

For months, the U.S. has tried to show banks worldwide how the Central Bank of Iran has abused the global financial system by helping Iranian banks evade financial sanctions--often with unwitting involvement from foreign banking partners. The U.S. predicts these foreign partners will find Iran too risky--and bolt.

While Rice struggled here to make progress on thornier strategic arms issues with Russia--Lavrov reiterated his country's disapproval of U.S. plans to place a missile defense shield in Eastern Europe--she has more momentum when it comes to pressuring business to shut out Iran.

This past summer, Deutsche Bank AG and Commerzbank AG, the two largest European banks to continue doing business with Iran despite recent U.S. pressure, agreed to follow other foreign banks and pull the plug on Tehran.

The U.S. has now excluded two of Iran's biggest state-owned banks, Saderat and Sepah, from conducting U.S.-dollar transactions. The banks have tried to operate in Euros, but the dollar squeeze has prompted the OECD to increase Iran's risk classification, thereby increasing the cost of financing for Iranian companies.

"Companies don't want their reputations to be harmed," a senior State Department official said during a Moscow briefing, implying in his comments that the financial campaign against Iran is delivering diplomatic results. "These are less sanctions than measures to prevent the abuse of the international financial system."

Always doing the dirty work for the Clown!