Treasury Warns G-7 About Iran

By Peter S. Goodman
Washington Post Foreign Service
Sunday, September 17, 2006

SINGAPORE, Sept. 16 -- U.S. Treasury Secretary Henry M. Paulson Jr. used his first meeting of world finance chiefs on Saturday as a venue to press the Bush administration's mission to isolate Iran and choke its nuclear aspirations.

Emerging from a meeting of finance ministers representing the Group of Seven industrialized nations, Paulson said he urged his counterparts to intensify efforts to prevent banks and private companies in their countries from being used as unwitting conduits for financing and materials aiding Iran's ambitions. He said scores of seemingly legitimate businesses are fronts in what the United States contends is a broad Iranian campaign to gain weapons of mass destruction and support terrorist groups such as Hezbollah and Hamas.

"There's a broad network of front companies, and these are not front companies that say 'Nuclear Acquisition Corp.' or 'Weapons Production Corp.,' " Paulson said at a news conference after the meeting. "These are mundane-sounding companies that do many legitimate activities, but in addition, do some of these untoward and illicit activities."

The Treasury Department's campaign comes after the Bush administration's failure to secure United Nations sanctions against Iran. Paulson portrayed the initiative as "an education job," giving his counterparts the ability to act voluntarily. Treasury officials have been dispatched worldwide in recent days to meet with finance ministers, banks and private companies, sharing intelligence aimed at illuminating how the Iranian network operates.

"There are finance ministers all over the world who want to do the right thing," Paulson said.

In a statement issued after the meeting, the G-7 finance ministers lent general support.

"We agreed to intensify our efforts to combat money laundering, proliferation network[s], as well as terrorist and illicit financing by addressing global financial vulnerabilities, particularly those associated with jurisdictions that have failed to recognize international standards," they said. (The G-7 consists of the United States, Japan, Britain, Germany, France, Canada and Italy.)

Paulson also pressed to resurrect a stalled effort aimed at boosting global trade. The Doha round of trade talks disbanded in July after years of fruitless wrangling, with poor countries accusing the United States and Europe of killing the chance for a deal by refusing to sufficiently reduce protective tariffs on agricultural goods. Paulson said the Bush administration remains willing to lift more tariffs, provided that U.S. exporters gain greater rights to sell their products abroad.

Paulson, who is to visit China on Tuesday, also reiterated the administration's long-standing contention that China must increase the value of its currency, the yuan. Manufacturers in the United States and elsewhere complain that a low-price Chinese currency makes Chinese goods unfairly cheap on world markets, effectively stealing jobs. China maintains that it is being cast as a scapegoat for the demise of U.S. manufacturing.

"I discourage high expectations for immediate results," Paulson said of his trip. "That's not the way the world works when you're dealing with important issues. I'm going to be listening."

He declined to put a number to his hopes for the yuan's increase.

"I certainly don't have a specific target for China," he said. "That would be presumptuous of me."

Echoing language it used in April, the G-7 singled out China and its controls over the value of its money as a source of "disorderly movements" in the global economy. "Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur," the finance ministers said in their statement.

Paulson was largely focused on Iran, which stems not from any new intelligence but rather from having come to the job fresh in June, and then absorbing briefings, Treasury Department officials said on condition of anonymity because they were not authorized to speak as individuals.

Paulson realized that while North Korea -- another source of concern about nuclear weapons -- was already sealed off from the international financial system, Iran remains integrated, with banks and trading firms throughout the world, including Western Europe, continuing to do business with the country.

Last week, the Bush administration announced that it had shut down access to the U.S. financial system for an Iranian state-owned institution, Bank Saderat, asserting that in recent years it has funneled some $50 million to organizations branded terrorist by the United States and the European Union.

Overall, Iran has in recent years delivered about $200 million a year to terrorist groups, including $50 million to Hezbollah in 2001 and again in 2002, said Stuart Levey, Treasury undersecretary for terrorism and financial intelligence.

In recent days, Levey and other Treasury officials have been in England, France, Switzerland, Italy, Germany and the United Arab Emirates to meet with officials of banks and private companies, offering counsel on how to limit their vulnerability to being used by Iran. Visits are planned in Asia.

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