Lawmakers push to stop World Bank loans to Iran

WASHINGTON (Reuters) - U.S. lawmakers considering new funding for the World Bank on Wednesday sought assurances that the development agency will not provide loans to Iran, which Washington accuses of seeking to develop nuclear bombs.

House of Representatives Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, and Brad Sherman, a California Democrat, raised the issue in a hearing on the Bush administration's request for $3.7 billion to replenish the World Bank's main fund for poor countries, the International Development Association (IDA).

Frank and Sherman pressed U.S. Treasury Assistant Secretary for International Affairs Clay Lowery over whether new World Bank loans for Iran were in the pipeline.

Lowery said the World Bank had not authorized development lending to Tehran in three years although payments under already approved loans, which the U.S. opposed, were still being made.

Those disbursements were difficult to stop because the loans were already approved, he said.

The United States is the second-largest donor to IDA, but not does not contribute to a separate fund which lends to wealthier middle-income countries such as Iran and China. That money is raised on international capital markets.

Lowery cautioned that if the United States cut its funding to IDA as a way to influence World Bank policy, it would punish poor countries and not Iran.

"If you cut assistance to IDA, what you are cutting is assistance to Haiti, Liberia, Afghanistan and Ghana, you are not cutting assistance to Iran," Lowery said.

'NOTHING AGAINST THE IRANIAN PEOPLE'

He said the U.S. Treasury had been critical of World Bank lending to Iran and tried to prevent it at the time.

"We have nothing against the Iranian people, it is something against the Iranian government," Lowery said. He added, "We need to continue to stop this until the government of Iran does change."

According to the World Bank, loan disbursements totaling $745 million for Iran were delayed in late 2007 because it had difficulties finding banks in Iran to make the payments because of international sanctions.

The bank approved nine projects to Iran between 2000 and 2003 through the International Bank for Reconstruction and Development, the World Bank's fund for middle-income countries.

The World Bank also has said it is in full compliance with U.N. sanctions against Iran, as U.N. Security Council resolutions on Iran exempt humanitarian and development activities conducted by global financial institutions.

As part of its campaign to stop Iran's nuclear program, the United States has barred dealings with four of Iran's largest banks, accusing them of involvement in terrorism, or nuclear or missile programs.

Iran says its nuclear program is a peaceful drive to produce electricity so it can sell more oil and gas abroad.

Frank questioned whether it was possible to work with European allies to stop World Bank loans to Iran, and said he hoped bank president Robert Zoellick would support those efforts.

"If we can get those assurances it would be very helpful," Frank said.

Sherman said payments that had not yet been made to Iran should be blocked.

In his main testimony, Lowery said the IDA's global reach made it an effective tool to advance U.S. interests in developing countries.

"The greatest opportunities and the most serious threats to the United States interests now come from the developing world," Lowery said.

(Editing by Vicki Allen)