On the face of it, it looks like a run-of-the-mill change to the Bundesbank’s terms and conditions. In the future, Germany’s central bank plans to impose new controls on cash withdrawals from accounts it holds, with any large withdrawals subject to thorough checks and possible refusal. But there’s more to the change than meets the eye: The underlying story is all about US sanctions against Tehran and their impact on Iranian monetary policy.
Last month, the US ambassador to Germany vociferously criticized plans by the European-Iranian Trade Bank to withdraw €300 million ($350 million) from the Bundesbank and send it in cash to Tehran. His calls for Germany to stop the transfer were in turn heavily criticized by local politicians.
The European-Iranian Trade Bank is registered in Hamburg but is majority owned by the Iranian government. It badly needs cash reserves to shore up its feeble currency, battered by America’s re-imposition of economic sanctions linked to its nuclear program.
It seems the Bundesbank is now running scared of those sanctions and the dangers of breaking them. Among possible reasons for refusing a large withdrawal, its new terms and conditions list anything which might “substantially threaten” the Bundesbank’s role in transfer payments and currency reserve management. Specifically, it mentions possible “jeopardizing of important relationships with central banks and financial institutions of third countries.”
The formulation ultimately refers to US threats against institutions which help in the evasion of sanctions against Iran. Clearly, the Bundesbank, like many German commercial banks, is worried about the possible rupture of “important relationships.” In other words: possible exclusion from US capital markets.
Other reasons given by the Bundesbank for refusing withdrawals include money laundering and terrorism. The European Union and the Financial Action Task Force (FATF) continue to cast doubt on Iran’s handling of these issues. The FATF is the main international organization in the fight against money laundering and terrorist financing.
Last May, the United States government announced its unilateral withdrawal from the framework agreement on Iranian nuclear verification, agreed in 2015. Accusing Iran of continuing to support terrorism and develop nuclear weapons, Washington re-imposed tough economic sanctions, including aggressive measures to prevent Tehran trading with other nations.
Europe has not withdrawn from the 2015 agreement, but European banks are now under severe pressure to sever ties with Iranian businesses and government agencies. In response, the European Union suggested that European central banks could handle some foreign exchange payments on behalf of the Iranian government. The change to the Bundesbank’s terms and conditions can be regarded as an emphatic refusal of these EU proposals.
Frank Wiebe is a New York correspondent for Handelsblatt, covering finance policy. To contact the author: firstname.lastname@example.org