Japanese Banks Curb Loans to Iran : June 25, 2007 The Financial Times Guy Dinmore in Washington and David Pilling in Tokyo

Japan's private sector, responding to signals from Washington, is adding to financial pressure on Iran by restricting loans and rejecting an Iranian request to pay for oil imports in currencies other than the dollar, banking and official sources say. A senior banker said three big banks - Bank of Tokyo Mitsubishi UFJ, Mizuho and Sumitomo Mitsui - had told the Iranian authorities in April that they would not conduct new business in Iran. The development puts Japanese banks in a different position to many European counterparts that have reduced dollar transactions with Iran but are still willing to conduct business in euros. The banker, who asked not to be named, said the banks' action followed pressure from Washington and reflected a hardening line towards Iran by Shinzo Abe, Japan's prime minister. The banker and a Japanese energy official said Iran had also proposed to Japanese trading houses in April that they pay for Iranian oil in non-dollar currencies. This apparently reflects Iran's concerns about the vulnerability of its dollar assets to a freeze by the US and its increasing difficulty in conducting international transactions in dollars. Trading companies declined to stop paying in dollars after consulting the Japanese government, the banker said. The energy official denied government influence, saying it was a private-sector matter. The US Treasury is at the forefront of Washington's efforts to put pressure on Iran over its alleged nuclear weapons programme and alleged support for "terrorist" groups in the Middle East. Iran, which rejects the allegations, says sanctions will not stop its civilian nuclear programme. Analysts argue over the likely impact of sanctions, noting that Iran's revenues are swelled by high oil prices. Hank Paulson, Treasury secretary, says US "outreach" to the international private sector is paying dividends. In recent months the US has also stopped two Iranian banks - Sepah and Saderat - from carrying out dollar transactions with other banks.