Tehran wants to fly suitcases stuffed with euros to Iran in one of the biggest cash withdrawals in history. The math of €300 million ($352 million) in bank notes could mean twelve cases weighing a total of 1,600 kilos.
Iran needs the money it holds in Germany to offset a dramatic shortage of foreign reserves following the US decision in May to abandon a historic nuclear arms deal and reimpose sanctions. But the repatriation plan puts Germany in a difficult position because the transfer will no doubt enrage US President Donald Trump, though Berlin has little scope to prevent it without proving that the money will go to fund terrorism.
Bild newspaper broke the story on Monday under the headline “No Cash for the Terror Regime!” The article quoted Mark Dubowitz, an Iran analyst at the neoconservative Washington-based Foundation for Defense of Democracies, saying: “Sending hundreds of millions in cash would undermine Germany’s stated commitment to block terrorism finance. The Iranian regime spends more than $16 billion a year on supporting the war in Syria and supporting the terror groups Hamas and Hezbollah.”
The Hamburg-based Europäisch-Iranische Handelsbank (EIH) has the money deposited at Bundesbank, the German central bank. The German government was informed about the plan a few days ago and the chancellery, finance ministry and foreign ministry, are in the process of checking it. A finance ministry spokeswoman said the transaction was being scrutinized for possible money laundering and terrorism funding, while a foreign ministry spokesman said: “It’s clear of course that part of the government’s checks will be to establish possible breaches of a sanctions regime.”
The German government is also in touch with the US and Israel about the transfer request. But the request touches on more fundamental political leanings. While Mr. Trump has turned his back on the 2015 deal to curb Iran’s nuclear ambitions in return for the lifting of sanctions, the other partners including Germany are determined to keep it alive.
The US’ ambassador to Germany, Richard Grenell, called on Berlin to refuse Iran’s request. Speaking to Bild newspaper, he said, “We encourage the highest levels of the German government to intervene and stop the plan.”
EIH, the Bundesbank and German financial watchdog Bafin declined to comment.
Financial sources in Tehran said the cash was needed to “calm the angry population.” Iran’s currency, the rial, has been falling for months and most exchange offices have closed. That’s understandable because they would have to sell foreign currency at the official rates set by the central bank which is almost 50 percent below the black market rates for dollars and euros.
People urgently need foreign currency to pay the university fees of their children studying abroad, service loans for real estate bought in Dubai or to buy foreign goods for their stores in Iran. Right now, only selected companies get foreign currencies at the artificially cheap official rates. That’s causing corruption and fanning rare protests about the state of the economy.
The US, bent on blocking Iran’s access to foreign finance, has imposed sanctions on Iran’s central bank governor Valiollah Seif and on an Iraq-based bank for “moving millions of dollars” for Iran’s elite Revolutionary Guard.
Paying for Iranian oil in euros
Europe doesn’t have financial sanctions against Iran. But German banks are increasingly withdrawing from deals with the country because they’re worried about being penalized by US authorities. Commerzbank, publicly-owned Landesbanken regional banks and DZ banks have all ceased doing business with Iran.
A few small cooperative banks that had continued to offer trade finance to firms dealing with Iran have come under such heavy pressure recently “that they’re no longer picking up the phone,” said one corporate consultant active in business deals with Iran. German flagship lender Deutsche Bank meanwhile “has a very cautious view of Iran and will keep that,” John Gibbons, who heads the bank’s transactions business, told Handelsblatt.
In its bid to turn the screws on Iran, the US also wants to thwart an EU plan to get central banks in Europe to transfer euros to the Iranian central bank in payment for Iranian oil, thereby circumventing the US financial system — oil sales have been settled exclusively in dollars but that’s no longer possible. Diplomatic sources told Handelsblatt that Tehran has asked the German government to get the Bundesbank to handle Indian payments for Iranian oil shipments as well. India is Iran’s second-biggest oil customer after China.
As Berlin wrangles with Washington over defense and trade, Tehran’s withdrawal request highlights another big policy difference.
Jan Hildebrand is deputy chief of Handelsblatt’s political coverage, Matthias Brueggmann covers Russian and Iran for Handelsblatt as its international correspondent and Andreas Kroene covers banks, regulations and financial markets for HB. To contact the authors: firstname.lastname@example.org, email@example.com, firstname.lastname@example.org