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11/5/03

House Panel Debates World Bank Loans to Iran

By Tandice Ghajar, National Iranian American Council

  

Washington DC, November 4, 2003 - The House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade and Technology heard testimony Wednesday October 29 on options for American policy regarding the $423 million the World Bank has resolved to loan Iran in the past three years, and $470 million in additional funding being considered.  The money is to be used for projects on healthcare and nutrition, Tehran 's sewage system, earthquake recovery, and environmental management.

Testifying before the subcommittee were William Schuerch, deputy assistant secretary of the Treasury for Multilateral Development Banks and Specialized Development Institutions, Ray Takeyh, professor and director of studies at the Near East and South Asia Center for Strategic Studies of the National Defense University, and Patrick Clawson , deputy director of the Washington Institute for Near East Policy. 

Present at the hearing were Subcommittee members Vice Chairwoman Judy Biggert (R-IL), Rep. Carolyn B. Maloney (R-NY), and Rep. Barney Frank (D-MA), and Rep. Brad Sherman (D-CA). All committee Republicans, including the Chairman, were absent from the hearing. Hill staffers interpreted the low turn out to reflect the improbability that the House would actually pass the bill punishing the World Bank for lending to Iran .

Congressman Sherman (D-CA), who initially brought the issue to the committee's agenda, listed reasons not to support World Bank aid to Iran, saying it would free money for a state, with which he drew a parallel to Hitler's Germany, and whose development of nuclear weapons were "aimed at us" in the next three years.  Sherman said that the regime in Iran spends the minimum necessary on the people and "every extra penny they can get their hands on to kill as many Americans as possible."  He advocated coercive policies, including threats of tariffs, to induce European countries to stop the disbursement of money to Iran . The United States controls the most shares in the World Bank, but not a majority of the votes. 

Sherman 's comments were at odds with Secretary Schuerch's testimony, in which the Treasury deputy pointed out that the charter of the World Bank specifies economic but not political involvement in its realm of activities. Though Secretary Schuerch shared the concerns of some in Congress with respect to the Iranian regime, he felt that the United States had already taken a strong stand against the Iran projects by exercising the option to vote against them rather than merely abstaining.  "We don't run the Bank," Schuerch reminded participants.

Representative Biggert expressed opposition to World Bank lending to Iran for similar reasons as Sherman , deeming Iran to be the number one state sponsor of terrorism in the world. She referred to its sponsorship of and involvement with the pro-Palestinian groups Hizbollah, Islamic Jihad, and Hamas, and mentioned that the regime is harboring members of Al-Qaeda.

Sherman and Biggert suggested that US aid money going to the Bank could instead be allocated to the US Agency for International Development, a policy proposal which Takeyh and Clawson considered a second-best option for the reason that the Bank is a more efficient development institution. 

Takeyh said that although World Bank funding is important for Iran 's development, suppression of lending would likely not have the same effect that multilateral reductions in trade and investment would with Iran , especially if it included European and East Asian trade.

Takeyh agreed that the Iranian economy is structurally flawed and corrupt, and that money from exports often goes straight into the pockets of the regime's leaders through shadowy foundations. Answering a direct query from Congressman Sherman, Takeyh said that most of the profits from non-petroleum exports to the United States go to the Rafsanjani family.

Patrick Clawson suspected that the Iranian regime's interest in World Bank lending would have been greater had it not recently benefited from high oil prices. A former employee of the Bank, Clawson agreed that Iran would be a poor candidate for World Bank lending from an economic perspective due to the opacity of the country's economy. 

Congressman Frank stated that though he is a supporter of the Bank generally, he felt that giving money to Iran seemed unwise. The other Subcommittee members present appeared to conclude from questioning the witnesses that there were many reasons to work against World Bank lending to Iran , but that the economic reasons were justification enough to bring to the other shareholders. 

In addition to funding from the World Bank, Iran recently won two awards from the Global Fund in the amount of $4 million for HIV/Aids and $3.5 for malaria.

More information about the subcommittee can be found at http://financialservices.house.gov/committees.asp?formmode=detail&comm=7 and http://www.house.gov/banking_democrats/, and records of World Bank funding of projects for Iran can be found at http://lnweb18.worldbank.org/mna/mena.nsf?OpenDatabase.

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The National Iranian American Council is a Washington, DC-based non-profit educational organization promoting Iranian-American participation in American civic and political life. As a non-partisan, non-profit 501 c(3) organization, NIAC is prohibited by law from taking a stance on legislative matters or endorsing political candidates This is not a political endorsement. For more information, please visit www.niacouncil.org, email NIAC at info@niacouncil.org or send a fax to 202-518-6187. All donations to NIAC are tax-deductible. 

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