Iran bank hit hard by U.N. sanctions: diplomats

By Louis Charbonneau

BERLIN (Reuters) - U.S. sanctions have hit the European operations of Iran's Bank Sepah hard, despite Tehran's contention the penalties have had little impact and initial U.S. concern they did not go far enough, Western diplomats say.

In March the U.N. Security Council imposed a second round of sanctions on Iran for refusing to suspend a nuclear program the West fears is aimed at making bombs.

Penalties included the freezing of foreign assets of 28 Iranian individuals and entities, including Bank Sepah.

Iran denies it is developing nuclear weapons and says its atomic ambitions are limited to generating electricity. Tehran also says the U.N. sanctions are having a minimal impact.

Iranian Foreign Minister Manouchehr Mottaki told U.S. National Public Radio last week: "In today's world, the instrument of sanctions is no longer effective."

But European and U.S. officials say Bank Sepah, which a senior U.S. Treasury Department official described as "the financial linchpin of Iran's missile procurement network", is struggling to survive the stranglehold of U.N. sanctions.

"The U.N. sanctions have seriously hurt the bank in Europe," a diplomat told Reuters, citing financial intelligence gathered by his country. He estimated that Bank Sepah's total commitments amounted to over $4 billion.

It was not immediately possible to verify that figure or get any specifics on the balance sheet of the parent bank in Tehran. Iranian officials in Tehran had no immediate comment.