Recent American Sanctions Influence World Bank Projects in Iran

Sources: U.S. Sanctions Force World Bank to Halt Some Iran Aid; World Bank delays some Iran aid due to US sanctions

Since the start of this month, the World Bank has had to curtail funding for four of its projects in Iran that focus on providing humanitarian assistance within that country.

The Bank’s actions are in pursuance of American sanctions against the four largest banks in Iran. The United States has targeted Bank Sepah, Bank Melli, Bank Mellat, and Bank Saderat for their involvement in 1) the Iranian government’s drive to obtain nuclear weapons, and 2) facilitating terrorist financing.

Announced on October 25, 2007, these sanctions are tougher than the two resolutions the United Nations Security Council (“UNSC”) has passed in the last two years. The UNSC resolutions have called for freezing assets associated with the Iranian government’s weapons program, and have targeted only one Iranian bank (Bank Sepah). In contrast, the American sanctions seek to prevent American nationals and the private sector at-large from doing any business with its target banks.

The United States and the World Bank are not alone in sanctioning these four Iranian banks; Prominent European banks have also halted interacting with these institutions. However, many banks and businesses in the Middle East and Asia continue to conduct business with the four banks targeted by the United States.

One World Bank official noted that while the Bank hopes to find alternative means to continue funding the humanitarian projects without undermining the American sanctions policy, it is uncertain whether such measures are available at this time.

Discussion:

1. What alternatives are there to ensure that the Iranian people will receive the aid that they need, while clamping down on the Iranian government’s efforts to develop weapons of mass destruction?

2. How should the Bank and the United States government engage other banks and businesses of other Middle-Eastern and Asian countries that continue to do business with the blacklisted Iranian banks so as to secure the objectives of the American sanctions policy?