Iran throws down a $50bn dollar gauntlet

A defiant Iran announced it has begun pulling its foreign currency accounts out of European banks to protect its assets from possible UN sanctions over its nuclear program.

A defiant Iran announced it has begun pulling its foreign currency accounts out of European banks to protect its assets from possible UN sanctions over its nuclear program.

As analysts estimated the amount of those funds at up to $50bn (€41bn), Iran also called yesterday for a reduction in OPEC oil production – raising the possibility that the country would use oil in its stand-off with the West.

Iran pumps about four million barrels of oil a day, making it the second largest producer in OPEC after Saudi Arabia.

Underlining his challenging stance, Iran’s hard-line president, Mahmoud Ahmadinejad, held a meeting in Damascus, Syria, yesterday with leaders from the Palestinian militant groups Hamas and Islamic Jihad.

The two governments expressed support for Iran’s right to the peaceful exploitation of nuclear power and criticised what they called the “selective and double-standard policy practised by some international powers in this regard.”

The remark was a reference to US and European opposition to Iran’s enrichment of uranium, a process that can produce material for atomic bombs.

The meeting came a day after an Islamic Jihad suicide bomber blew himself up in a Tel Aviv restaurant, wounding 20 people. Israel accused Iran and Syria of being behind the attack, a charge both countries denied.

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

Yesterday’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.

Crude oil prices rose above 67 dollars yesterday amid concern over the Iranian nuclear dispute, unrest in Nigeria and al-Qaida’s threat of terrorist attacks in the United States.

Analysts fear that oil prices could surge much higher – even beyond 100 a barrel – if the UN Security Council imposes trade sanctions on Iran over its nuclear activities.

Iran’s Oil Ministry confirmed yesterday that the country is pushing for the Organisation of Petroleum Exporting Countries to cut its overall production.

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 semi-official 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 US 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.

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