The European Central Bank said no payments that contravene European Union sanctions on Iran are cleared via its payments system, Target2, as U.S. lawmakers consider pushing for tougher controls on euro-based transfers to the country.
The ECB ensures that no illegitimate transactions are cleared in Target2, a spokesman for the Frankfurt-based ECB said by telephone.
U.S. lawmakers want to use legislation to put pressure on the ECB to take action, according to a congressional aide familiar with the proposals. Mark Dubowitz, executive director of the Foundation for Defense of Democracies in Washington, says some ECB policy makers are prepared to ban Iranian counterparties from Target2.
“Target2 is crucial to Iran because U.S. financial sanctions have already curtailed much of Iran’s dollar-denominated business,” Dubowitz, who has advised the U.S. Congress, said in an interview. “Euros are Iran’s principal hedge against the impact of sanctions.”
The 27-nation EU bans transactions with Iranian banks apart from some pre-approved payments including those relating to food and medicine. The assets of at least three Iranian banks have been frozen as part of a list of sanctioned people and entities considered to be providing support to the Islamic Republic’s government. Iran denies allegations that it is seeking to build nuclear bombs.
Information available on the ECB’s website shows that four Iran-based banks have a total of six branches registered in the ECB’s database of financial institutions, although they may not be eligible to receive refinancing loans from the central bank.
The ECB spokesman said the central bank doesn’t comment on individual counterparties.