Money troubles: Iran seeks return of $216m deposited in local bank

Pakistan could ask for exemption from sanctions, settle the money in barter trade.

Shahbaz Rana December 03, 2014


Iran has asked Pakistan to return $216 million that it had deposited in KASB Bank, which is currently under State Bank of Pakistan’s supervision, creating a diplomatic issue for the federal government.

The request was made by Iranian Ambassador to Pakistan Ali Reza Haghighian during a meeting with Federal Minister for Finance Ishaq Dar on Wednesday, according to officials of the Ministry of Finance.

Iran took up the issue days before a scheduled Joint Ministerial Commission (JMC) meeting with Pakistan.

It had deposited the money in KASB Bank few years ago, which it could not withdraw after the United States imposed sanctions on the Gulf state.

Officials said the issue would be settled only in a legal manner as Pakistan could not afford to violate the sanctions regime. Owing to the restrictions, the government is also not actively pushing ahead with the Iran-Pakistan gas pipeline project.

On November 14, the State Bank of Pakistan placed KASB Bank Limited under moratorium for a period of six months. The central bank has suspended certain debt and other obligations. It has allowed bank depositors to withdraw up to Rs300,000 and placed curbs on withdrawals above that level.

The $216 million or Rs22.2 billion constituted 35% of the total deposits of Rs63.1 billion of KASB Bank in December last year.

Officials of the finance ministry argued that the issue of deposits was between the Iranian government and the private bank and there was no binding obligation on the federal government to sort it out.

However, they added, the options of seeking exemption from the US sanctions and settling the money in barter trade could be considered.

They did not rule out the possibility of clearing the dues during the moratorium if both the sides found a solution pertaining to the sanctions.

Final decision would be taken by the finance minister during the inter-ministerial meeting ahead of the JMC sitting, they said.

According to the officials, Tehran will also have to establish its case and the government will take a decision only when the State Bank of Pakistan confirmed the deposits.

Owing to the US curbs, Pakistan has also not been able to pay roughly $200 million to Tehran for electricity purchases. This delay in payment came under discussion in the meeting and it was suggested that Iran could buy rice, sugar and wheat from Pakistan instead of seeking cash payment.

Dar and the Iranian ambassador also reviewed the proposed agenda of the upcoming meetings, according to a handout issued by the finance ministry.

The minister was of the view that the upcoming visit of Iranian finance minister would help in enhancing economic cooperation between the two countries. Islamabad was looking forward to any suggestion from the Iranian side to deepen bilateral trade and economic relations, he said.

Dar was also very optimistic about the success of the JMC meeting as the leadership of the two countries was serious about addressing the issues and taking steps for better cooperation.

Published in The Express Tribune, December 4th, 2014.

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Xnain | 6 years ago | Reply

@Sonya: The mansha gossip was a cover up. KASB had been failing to meet MCR for years now and getting short term fixes with SBP looking the other way. But with Iran, US has placed financial sanctions whereby the bank making any transaction with Iranian residents or companies will be prohibited to transact in US Dollar or any other currency. KASB's transactions with Iran and inability to now explain a very large deposit (Now unearthed) led to the moratorium.US pushed the screws and SBP acted. KASB can now safely say bye bye to its trade business.

Truth | 6 years ago | Reply

@Sonya: "The comment by @Truth above is a complete nonsense – it wasn’t a gift money to Pakistan and asking to return isn’t immoral either. " I never said that it was gift money or that asking for its return is immoral. Unfortunately, you have inferred what I did not imply. All I was trying to say is that like Saudi Arabia, Iran should also consider helping out with some money, even loan. For, given Iran's oil exports and less than half the population of Pakistan, and despite sanctions, Iran is in a better financial and economic position than Pakistan. So it can help ease Pakistan’s current financial difficulties; just as we helped Iran during its 1980-1988 war with Iraq by sending wagon after wagon of the much needed wheat to Iran, which sustained Iran during very difficult times. Iran needed Pak wheat supplies very badly as other sources were scant since the Gulf was insecure, neither Turkey could supply from the West, nor could grains starved Soviet Union help from the North. So we proved to Iran as a true friend and Iran should reciprocate.

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