Iran’s $40 billion Transfers to Chinese Banks Sidestep Financial Isolation

Iran has burrowed under the regular global financial system to create a huge clandestine money-transfer, commercial and currency exchange machine for getting around the US-led Western sanctions hobbling its international trade.
The vice was tightened painfully when the Belgian-based Society for Worldwide Interbank Financial Telecommunications (SWIFT), which facilitates most of the world’s bank transfers, Saturday, March 17, cut 30 Iranian banks off from its services
DEBKA-Net-Weekly’s West European financial sources report that Iran is being helped to clamber over the sanctions stile by China, Pakistan, India and Russia. They are assisting in the construction of this underground network as a pipeline through which Iran can continue to conduct its commercial business with the outside world and evade the financial isolation to which sanctions seek to condemn the Islamic Republic for its nuclear weapons program.
Israeli Foreign Minister Avigdor Lieberman found Chinese hosts unresponsive on this matter during his visit to Beijing this week. While calling their talks “open and productive,” he failed to persuade Chinese officials to suspend their backdoor business pipeline – at least through to the end of 2012, in order to give US-European financial sanctions and oil embargo a chance to take off.
Chinese officials declined to discuss any issue outside bilateral relations with Israel.

China profits from Iran’s sanctions-busting measures

DEBKA-Net-Weekly’s intelligence sources report that international financial circles were not surprised by Iran’s maneuvers and tricks for evading financial sanctions. Two years ago, anticipating the blockage of its regular trade avenues, Tehran began transferring billions of dollars to Chinese banks, which as a rule do not enter into foreign currency transactions with foreign banks.
However, the sums were so vast and the profits so tempting that Beijing was persuaded to make an exception to this rule.
International financial circles estimate that Iran transferred sums in the $ 25-50 billion range to Chinese banks.
China undertook to make available the amounts need to buy essential goods which the embargo prevents Iran from acquiring directly.
Beijing does the shopping and draws on the Iranian deposits to pay for the purchases. The goods are delivered to China and transferred to Iran via Pakistan.
China is making a very tidy profit from its shopping service for Iran. Beijing is charging Tehran an extra four-percent to cover insurance dues and another four percent surcharge as a “risk fee,” over and above the expensive roundabout delivery route.
Already, China may be clearing as much as a billion dollars a year from this service alone.
When Washington found out about these arrangements about a month ago, US officials turned to Beijing to get them stopped. They ran into a blank wall; the Chinese refused to give up their hugely profitable service for Iran.

Pakistan lets Iran use its halwa system

Pakistan has also proved willing to help Iran break out of the tightening sanctions noose, DEBKA-Net-Weekly’s Gulf sources report.
Tehran turned to Islamabad in mid-2011, when the Arab Gulf emirates, spearheaded by Saudi rulers, cut Iran out of their sprawling international halwa system which moves vast sums of money around among Muslim communities.
Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum called together all the halwa branch heads in the region, many of them family relatives, and threatened to withdraw his protection if they continued to work with Iran.
Deprived of this channel, Tehran asked Islamabad for the use of the Pakistani halwa network, an independent system unconnected to Persian Gulf entities which operates largely under Pakistan’s Inter Services Intelligence (SIS) supervision.
Pakistan then faced heat from the Obama administration. Washington demanded that Lt. Gen. Ahmed Shuja Pasha be replaced as director of the ISI service, accusing him of opening the network to Iran.
It was in apparent compliance with this demand, DEBKA-Net-Weekly’s military and intelligence sources report, that on March 9, the Pakistani government announced Gen. Pasha would be replaced on the 18th of the month by Lt. Gen. Zaheer ul Islam.
But the Americans had little reason to celebrate. The Pakistani government had cynically replaced Gen. Pasha with an officer even more deeply involved in Iran’s financial shenanigans.
Gen. ul Islam is commander of the Karachi Corps, based in the southern Pakistani town which houses national headquarters. In this capacity, he could not have missed the thousands of halwa companies employed exclusively by Iran for its underworld money-laundering and money transfers springing up in the city during his watch.

Russia, India and Turkey help Iran too

This provocative appointment laid bare Pakistan’s long and constant clandestine links with Iran in support of its nuclear program. They go back 23 years to 1989, when Abdul Qadeer Khan, father of the Pakistan bomb, who also ran a nuclear black market, visited Tehran and persuaded Iranian leaders to start enriching uranium independently with Pakistani P1-model centrifuges. They are still in use today.
Western financial sources say Iran is shielded from financial isolation by three more countries – Russia, India and Turkey.
Precise information about their assistance is still sketchy.
Russia, like China, does not recognize the legitimacy of the oil embargo or the financial sanctions imposed by the United States and Europe.
Western financial sources suspect a number of local Russian banks which have no business dealings with the American banking system may be handling transactions between Iranian and Far Eastern banking institutions.
While the Indian government states publicly that it has cut down on its oil imports from, and financial deals with, Iran, this is not borne out by facts.
New Delhi appears to be rendering Tehran valuable assistance for beating sanctions. Their bilateral business is being funneled through the Indian UCO Bank based in Calcutta, whose board is divided between Indian government and the Reserve Bank of India representatives.
This bank has very little to do with American and European financial entities. Its trade with Iran is conducted almost exclusively in Indian rupees and gold.
Turkey too has its hands deep in sanctions-busting transactions with Iran: Its seventh largest bank, the state-owned Halkbank, is a conduit for Iran’s oil-related earnings.

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