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Wed 18 Jun 2008 12:03 PM

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Bank Mellat denies Iran pulling funds from Europe

Statement contradicts reports Tehran withdrawing assets in face of sanctions.

Iranian banks are not moving funds from Europe, the head of a state bank was quoted as saying, contradicting reports that Tehran was withdrawing assets in the face of tightening sanctions over its nuclear programme."Such an issue has not ever been put forward," Ali Divandari, managing director of Bank Mellat, was quoted as telling the semi-official Mehr News Agency on Tuesday.

His comments were also carried by newspapers on Wednesday. "Iranian banks do not have any problem with European banks and there is no reason for [transferring] Iranian banks' assets from European banks," Iran News quoted him as saying.

An Iranian weekly previously said Iran has withdrawn $75 billion from Europe to prevent the assets from being blocked under threatened new sanctions over its disputed atomic plans.

Western powers are warning the Islamic republic of more punitive measures if it rejects an incentives offer and presses on with sensitive nuclear work, but the oil-rich country is showing no sign of backing down.

The Shahrvand-e Emrouz weekly quoted Mohsen Talai, deputy foreign minister in charge of economic affairs, as saying that a part of Iran's assets in European banks had been converted to gold and shares and another part transferred to Asian banks.

Iran's Etemad-e Melli newspaper, also quoting Talai, last week reported that the world's fourth-largest oil exporter was withdrawing assets from Europe but did not give figures.

Iran has again ruled out suspending uranium enrichment despite the offer by six world powers of help in developing a civilian nuclear programme if it stopped activities the US and others suspect are designed to make bombs.

The offer - agreed last month by the US, Britain, Russia, China, Germany and France and presented to Iran on Saturday - is a revised version of one rejected by Tehran two years ago.

Iran's refusal to suspend nuclear enrichment, which can provide fuel for power plants or material for weapons if refined much more, has drawn three rounds of UN sanctions since 2006. Tehran says it only aims to generate electricity.

EU diplomats have said the bloc is preparing an asset and funds freeze on Iran's biggest bank, state-owned Bank Melli, but that it first wants to see how Tehran responds to the new offer.

The US imposed sanctions on Bank Mellat and other Iranian bodies, including part of Iran's military, in October.

Bank Mellat has dismissed as "baseless" the US charges, which included accusing it of providing banking services to support Iran's nuclear activities.

Iran is making windfall gains from record global oil prices and said in April its foreign exchange reserves stood at more than $80 billion. (Reuters)

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