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Iran dodges from sanctions' reach

Associated Press
Published January 21, 2006

TEHRAN, Iran - A defiant Iran announced Friday it has begun pulling its foreign currency accounts out of European banks to protect its assets from possible U.N. sanctions over its nuclear program.

As analysts estimated the amount of those funds at up to $50-billion, Iran also called for a reduction in oil production by the Organization of Petroleum Exporting Countries - raising the possibility that the country would use oil in its standoff with the West. Iran pumps about 4-million barrels of oil a day, making it the second largest producer in OPEC after Saudi Arabia.

The currency withdrawal signaled that Iran was willing to weather U.N. punishment rather than abandon its nuclear ambitions, which the United States and some in Europe say are to develop atomic weapons. Tehran insists its program is for peaceful purposes only.

Friday's move also deprives Europe of an important lever to influence Iran and could weaken its resolve to push Iran to give up key parts of its nuclear program, analysts said.

Iran's Oil Ministry confirmed Friday that the country is pushing for OPEC to cut its overall production.

Ministry spokeswoman Souzan Shakourzadeh said the move was connected to the expected fall in demand for oil in the second quarter of 2006 and not to the nuclear dispute. She could not say how large a cut Iran is seeking.

The announcement of the withdrawal of Iran's foreign currency accounts from Europe came from the country's Central Bank governor, Ebrahim Sheibani.

"We transfer the foreign exchange reserves to wherever we deem fit," Sheibani was quoted as saying by the semiofficial Iranian Students News Agency. He would not say how much money was involved or where Iran would move it.

It was not immediately clear whether Iran's investments and property in Europe would also be affected.

Iran's assets in the United States were frozen shortly after the 1979 revolution that toppled the pro-Western Shah Mohammad Reza Pahlavi and installed a clerical regime.

Economists said the impact on the global economy would be muted since the amount is not large in comparison to other countries' reserves and since there was no sign the money would be shifted from dollars and euros to other currencies.

Analysts put the amount of Iran's funds in Europe at between $40-billion and $50-billion - far below the holdings of countries such as China, which had $819-billion at the end of December.

Momentum gathered Friday for Europe to take steps against Iran with two senior officials speaking out against the country's nuclear activities.

Italian Foreign Minister Gianfranco Fini said Iran's nuclear program was testing the world's resolve.

"The international community must have a defined, very precise, very united strategy," Fini said.

The head of France's armed forces, Gen. Henri Bentegeat, accused Iran of trying to obtain nuclear weapons. Iran "presents a major worry because it is a country that has shown extremely bellicose intentions," he told RTL radio.

Iran removed some U.N. seals from its main uranium enrichment facility in Natanz, central Iran, on Jan. 10 and resumed research on nuclear fuel - including small-scale enrichment - after a 21/2-year freeze.

[Last modified January 21, 2006, 01:34:14]

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