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German Bank Continues Trade with Iran Despite Sanctions

05/29/11 Source: Moj News

European Iranian Trading Bank, a Hamburg-based, Iran-owned bank, said it would continue to do business despite sanctions the European Union ordered earlier this week, Wall Street Journal reported. The bank, known under its German acronym EIH, said the sanctions didn't mean it would have to discontinue operations.

European-Iranian Commercial Bank (Eihbank) office in Tehran

The EU on Monday ordered a freezing of EIH accounts, based upon U.S. claims that the bank does business with Iranian entities sanctioned by the United Nations Security Council.

EIH has denied it violated EU or U.N. sanctions, and vowed it will "take immediate legal steps" against the EU sanction order.

The Bundesbank, which oversees the enforcement of sanctions against banks that are licensed in Germany, said the sanction order prevents EIH from contracting new business, but EIH may continue to service contracts concluded prior to the sanction order.

EIH said it will continue to service letters of credit issued prior to May 23.

"This applies also to the letters of credit of listed Iranian banks that were advised by us before the opening bank and ourselves had these restrictive measures imposed," the bank said. The Bundesbank, however, expressed a different view in an emailed response to a Wall Street Journal query, saying the EU sanction directive prohibits EIH from executing transactions on behalf of sanctioned people or entities.

Norbert Eisenmenger, an EIH department chief responsible for finances and marketing, said in a telephone interview that much of EIH's business involves long-term contracts such as payments for complicated machinery that the bank is obligated to execute.

"Nothing has changed; the same Bundesbank office which approved our transactions during the investigation will continue to approve our transactions under sanctions," Mr. Eisenmenger said. He declined to quantify the number of continuing transactions contracted prior to the EU sanction order, but said the amount of EIH's business would decrease over time. In its most recent annual report, EIH said it processed transactions valued at 3.6 billion ($5.1 billion) in 2009.

In its email, the Bundesbank spokeswoman said EIH must report transactions related to pre-existing contracts if they exceed 10,000, and must obtain Bundesbank approval before executing transactions that exceed 40,000.

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