Iran & Sanctions: "All Major Pakistani Banks Refuse Transactions" (Shah)

I was going to post this story, from Shahid Shah in The News in Pakistan, in our Tuesday updates, but it seems so potentially significant --- given that Pakistan neighbours Iran and that the story also points to a choking-off of trade via Dubai, which has handled a large share of trade with Tehran --- that we have given it a separate entry:

Economic sanctions on Iran by the United States has also affected Pakistan’s exports as all major banks have refused to conduct transactions with the troubled nation, exporters said on Monday.

Although there is no official ban on the transactions of Pakistani banks with Iran, banks are hesitant to incur the superpower’s wrath, they said. Several Pakistani exporters’ dues were withheld in Iran as no bank was ready to conduct transactions, they added.

The head of a private bank on the condition of anonymity said that they were in no position to challenge this power structure. He agreed that a majority of Pakistani banks were not conducting transactions with Iran.

One of the major trade routes with Iran is via sea to Bandar Abbas from the Pakistani ports, while the land route to Taftan in Iran is from the Chaman border in Balochistan.

An exporter said that the land route remains unfeasible for exporters from Karachi. This route is also used as a means of smuggling. According to reports, Iran closed its Taftan border with Pakistan on Sunday amid threats of suicide attacks in its territories.

Pakistan had been conducting trade with Iran via Dubai. After dollar transactions from Iran stopped under the sanctions, Dubai banks started transactions in euro, but now it is carried out in the UAE dirham, a source said.

An exporter told The News that even Dubai was not opening letters of credit (LCs) with Iran for the last one month. “This is now a very critical situation.”

According to the data of the Federal Bureau of Statistics (FBS), exports to Iran declined by 55 per cent to $116.79 million during the eight months from July 2009 to February 2010 against $259.70 million during the corresponding period last year.

Kazim Khandawala, one of the leading basmati rice exporters, told The News that a majority of the banks in Pakistan stopped transactions with Iranian banks since one-and-a-half-year.

“We had been doing our business via Dubai. If we state Bandar Abbas as our port of destination in the State Bank of Pakistan’s export form, banks refuse to handle the money.”

During trade via Dubai, Khandawala said that they paid nearly four percent in commission to the agents as land routes were made illegal and goods were under-invoiced.

Khandawala, who was a major basmati rice exporter to Iran with a volume of around 40 containers a month from 2002 till 2007, has almost lost his business due to transactional problems. “Now, I barely send two containers a month.”

Due to the refusal of Pakistani banks to conduct transactions, Indian rice exporters sold their variety 1121 rice, which was purchased by Iranians in the absence of Pakistani basmati rice.

Iran is a huge market where Pakistan could sell its entire production of basmati, he said. “Though India has fully captured Pakistan’s basmati market in Iran, Pakistani rice can still be sold there, as our rates are good and we have people-to-people contact,” he added.

The Latest from Iran (6 July): Compromise?

2047 GMT: Today's All-is-Well Alert. Press TV plays up the statement of the head of Iran's Trade Promotion Organization that, despite UN sanctions, non-oil exports have grown 27%.

No word in the statement on how oil exports are doing.

Iran & Sanctions: Could Tehran’s Flights Be Grounded?
Iran Analyses: A Rafsanjani-Khamenei Deal on Universities Crisis? (Siavashi and Verde)
The Latest from Iran (5 July): Talks and Conflicts

2045 GMT: Energy News. Iran has finally put out a major oilwell fire which had been raging for 38 days.

2040 GMT: Parliament v. President. Kalemeh has more information on today's attack by legislator Ahmad Tavakoli (see 1230 GMT) on the Government and his claim of Mahmoud Ahmadinejad's lack of respect for the law.

1705 GMT: Political Prisoner Watch. Journalist Sasan Aghaei, held from November to April with 40 days in solitary confinement, has been given a one-year prison sentence.

1500 GMT: Parliament v. President. "Conservative" member of Parliament Reza Akrami has issued another denunciation of the recent demonstrations against the Majlis and its bill on control of Islamic Azad University: "Those who insult the Majlis stand apart from hardline principles. What happened was illegal."

1455 GMT: A Minor Strike? Press TV, while referring on today's stoppage by traders at the Tehran Bazaar, says that it was a "minor strike" by "several wholesale cloth traders". The website does note the jewellers' guild has announced it will join the strike on Wednesday (there were reports that some gold traders had closed their doors today).

In what appears to be an immediate reaction to the strike, Mehr News reports that Iran's Ministry of Commerce has reversed its decision to raise business taxes by 70%.

1355 GMT: Defending Iran. An intriguing angle emerging from the Mousavi-Khatami meeting (see 1235 GMT)....

The two men denounced the UN sanctions against Iran, questioning why no similar action had ever been taken against Israel and declaring that the Iranian people will not let any power interfere with their internal affairs". Mousavi and Khatami also criticised "the West" for its support of "terrorist groups".

1235 GMT: Meetings. Former President Mohammad Khatami's website has published a summary of his meeting on Monday with Mir Hossein Mousavi (see 1125 GMT).

1230 GMT: Parliament v. President. Another challenge from key member of Parliament Ahmad Tavakoli, who has said in a speech --- my paraphrase --- "How dare the President say that the law does not apply to him."

1220 GMT: The Bazaar Strike. Peyke Iran claims that this morning's strike in the Tehran Bazaar (see 1120 GMT) over Government taxes was in the gold and textile markets.

1215 GMT: Airlines, Sanctions, and Safety. A new twist in the tale of Iran's possibly-grounded flights: the European Union has banned most of Iran Air's jets from flying to Europe. EU officials denied that the measure was connected to international and US sanctions, with a spokesperson insisting, "We deal purely with safety requirements. Our controls focus entirely on safety, nothing else."

1130 GMT: Press Un-Freedom. One weekly publication in Tehran Province, Madineye Goftogu, has been banned for "slander of officials" and three others have received warnings.

1125 GMT: Discussions. Aftab News reports that Mir Hossein Mousavi and former President Mohammad Khatami have met to discuss the domestic situation and international sanctions.

1120 GMT: Economy Watch. Kalemeh claims, from eyewitnesses, that there was "unrest and strikes" amongst merchants, protesting over Government tax policy, in the Tehran Bazaar this morning.

1115 GMT: The International Front. The Chinese Foreign Ministry has criticised unilateral US sanctions in a news briefing: "China has already noted that the United States and other parties have unilaterally put in place further sanctions against Iran. Not long ago, the U.N. Security Council approved resolution 1929. China believes that the Security Council resolution should fully, seriously and correctly be enforced and cannot be wilfully elaborated on to expand Security Council sanctions measures."

Meanwhile, the head of the Iran-United Arab Emirates Chamber of Commerce says the managers of two companies linked to Iran’s Islamic Revolution Guard Corps have had their bank accounts frozen in response to the latest UN sanctions: “Khatam al-Anbiya and their subsidiaries, and companies that they thought were involved in Iran’s atomic work, are on the list.”

0830 GMT: Political Prisoner Watch. Parvin Jamalzadeh, detained on Ashura (27 December) has been sentenced to 8 1/2 years in prison for acting against national security by participating in illegal gatherings, disturbing public order, committing blasphemy, and insulting the Supreme Leader.

Journalist Emaduddin Baghi's court appearance has been postponed to mid-August.

Rooz Online publishes an interview with the daughter of Mohammad Seddigh Kaboudvand, the founder and president of the Kurdistan Human Rights Defense Organization, who is entering the fourth year of a 10-year prison sentence.

Tonia Kaboudvand speaks of worries over her father's health and says, “Human rights activists and defenders have been silent about my father’s situation and have over time forgotten about it.”

0810 GMT: Investment v. Sanctions. Rooz Online summarises this interesting development: Iran is removing barriers to foreign banks operating in the country.

Deutsche Welle, however, notes that sanctions are causing increasing difficulties for European companies such as EON and RWE to invest in Iran's energy sector.

0755 GMT: Attack on the Clerics. Ahmad Montazeri, the son of the late Grand Ayatollah Montazeri, has reiterated that the attack on his family's house last month was carried out in the presence of some government officials.

0745 GMT: The Labour Front. Iranian Labor News Agency reports that 500 workers at the Abadan oil refinery have protested and gone on strike over unpaid wages.

0715 GMT: Halting Democracy? Green Voice of Freedom claims that the recent Parliamentary decision to postponing municipal elections is the first step in a plan, backed by the Supreme Leader, to eliminate all elections.

0705 GMT: Rafsanjani Watch. And, amidst the talk of a Khamenei-Rafsanjani deal to avert immediate political crisis, two stories in Rah-e-Sabz that indicate others in the Government are still trying to cut down the former President.

The website claims that Rafsanjani was banned from ceremonies last week marking the "7 Tir" bombing of 1981. And it reports that the head of the office of Yasser Hashemi, Rafsanjani's youngest son, was arrested yesterday.

0700 GMT: Then Again.... Back to our opening story on the supposed resolution of the Islamic Azad University crisis through the Supreme Leader's intervention. A member of the Supreme Council for Cultural Revolution has said that the suspension of the SCCR's decision --- which effectively overrules Parliament and backs President Ahmadinejad --- is only temporary.

Press TV is now reporting on Khamenei's letter to Ahmadinejad and Rafsanjani "suspending" any decision on the university.

0650 GMT: Parliament v. Government. The Majlis is insisting that it should have the authority, as prescribed by the Constitution, to review treaties with foreign countries or companies.

The declaration should be seen in the specific context of the intervention by Speaker of Parliament Ali Larijani and other legislators in the international manoeuvres over Iran's uranium enrichment.

0640 GMT: Flashback of Resistance. Green Voice of Freedom recalls Mir Hossein's final appearance on Islamic Republic of Iran Broadcasting: "Death, yes. Retreat, never."

0630 GMT: Sanctions and Iran's Airlines. More follow-up from our story yesterday that US-led sanctions on fuel for Iranian aircraft may be grounding flights....

The Iranian Foreign Ministry has denied this morning that any flights are being affected and insists that supplies are uninterrupted.

The German Government has again said that fuel has been refused. That, however, does not cover the possibility that private companies --- like BP, who said yesterday that it had suspended deliveries --- have cut off supplies.

0530 GMT: We begin this morning with another check on the state of the universities crisis between President, Parliament, and Hashemi Rafsanjani.

Iranian media are taking the line that the Supreme Leader has ordered a suspension of both the Parliament's bill and the intervention of the Supreme Council of the Cultural Revolution, which in effect backed President Ahmadinejad's control of the university. It is unclear what Khamenei's decision means for the future of the institution; the university's new President was supposed to be appointed yesterday.

It is notable, however, that the suspension effectively recognised the current arrangements: 1) the Supreme Leader's order was announced by the university’s board of trustees; 2) Khamenei's directive went not only to Ahmadinejad and the SCCR but also Rafsanjani as "Board of Trustees Director".

UPDATED Iran & Sanctions: Could Tehran's Flights Be Grounded?

UPDATE 1740 GMT: Britain's largest oil company BP has instructed its European operations not to refuel Iranian airlines "due to a decision from the U.S. Congress".

UPDATE 1530 GMT: Press TV has now posted a story which repeats the claim that Britain, Germany, the UAE, and Kuwait have suspended supplies of fuel.

Press TV adds denials from German'sTransport Ministry and Abu Dhabi airports that there was any ban; however, as EA readers have noted, this does not preclude a cutoff by private suppliers.

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The German Bureau first alerted us to this potentially significant story this morning. A key pro-Government member of Parliament, Kazem Jalali, had spoken of court action against the US for its unilateral sanctions against Iran. Jalali specifically noted the American threat to suspend sales of aircraft fuel (see our morning updates).

Deep in the story was the note that the United Arab Emirates, Kuwait, and Germany had followed the American lead and halted fuel supplies.

Hours later came the confirmation, via Iranian Students News Agency and then relayed outside Iran, from the secretary of Iranian Airlines Union: "Since last week, after the passing of the unilateral law by America and the sanctions against Iran, airports in England, Germany, the UAE have refused to give fuel to Iranian planes."

Peyke Iran followed by reporting that an Iran Air flight from Frankfurt, Germany had been postponed and might be cancelled due to the fuel shortage.

And now our German Bureau adds this bit of information: on Sunday Iran Air cancelled a flight to Hamburg, Germany.

Watch this (air)space for developments....