American squeeze on Iran presses on London
The US Treasury has taken two courses of action. Both affect the ability of the UK subsidiaries of four Iranian-owned banks to do business in London. Officially it has imposed sanctions against Bank Saderat and Bank Sepah, including their branches in Europe and their UK subsidiaries. The US Treasury publicly accuses both banks of sponsoring terrorist activities and has cut them off from the US financial system.
At the same time, the US Treasury has put informal pressure on international banks to cease doing business with any Iranian banks, including their UK subsidiaries, irrespective of whether they have been accused of any wrongdoing.
Although Iranian banks are not able to do business in the US, thanks to the so-called “U-turn” exemption the settlement of transactions in US dollars through New York is permitted. So an Iranian bank in London is legally able to settle US dollar payments using non-US banks as clearing agents; these clear the payments through their US correspondent banks.
But the US Treasury’s hard-line stance means that more and more international banks, including Barclays and Credit Suisse, are unwilling to clear payments for Iranian-owned banks, including their UK subsidiaries, in any currency.