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World Bank moves towards resuming Iran loans
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posted May 14, 2001 12:02
The Financial Times
By Alan Beattie, Economics Correspondent
May 11, 2001
The governing board of the World Bank on Thursday moved towards resuming lending to Iran despite objections from Israel and the US.
The bank last lent to Iran in May last year. A majority of the board backed a staff proposal to re-engage with the country. The staff will now prepare a full country assessment strategy that will form the basis for further loans. The staff report considered by the bank on Thursday suggested a programme of lending for strictly humanitarian ends, including environmental protection, sewerage and education.
A majority of the World Bank board, made up of 24 representatives from the bank's member countries, backed the staff proposal. It would involve lending about $700m over two years. But the US representative registered objections to the deal, saying the policy environment in the country was inhospitable to World Bank lending.
Israel - represented on the bank's board by a Dutch official - said Iran's activities in the Middle East made it an unsuitable recipient for World Bank lending.
The World Bank currently has a $240m sewerage and primary healthcare project in Iran which was agreed last year in spite of similar objections from the US. World Bank staff said a new programme of loans would take at least a year to design. They would have to be voted on again by the board before any disbursement.
A simple majority on the board can approve the loan. This means the US, with a 17 per cent voting share, and Israel, with a much smaller weighting, will need to find other objectors to prevent the loans going ahead.
The Israeli objection may revive arguments about World Bank lending being affected by political considerations.
Last year the bank was accused by China of failing to support a controversial project in the western Chinese province of Qinghai which would have involved the resettlement of thousands of Tibetan herders. The Chinese accused the bank of being overly influenced by political lobbying from Tibetan rights groups based in Washington.
The World Bank's constitution forbids it from taking political decisions, but its recent move towards an emphasis on improving governance in member countries has sometimes led it into difficult territory.
posted May 14, 2001 12:09
U.S. 'strongly opposed' to World Bank work in Iran
By Anna Willard
WASHINGTON, May 11 (Reuters)- U.S. officials said on Friday they are "strongly opposed" to any engagement by the World Bank in Iran, and registered their opposition with Group of Seven finance ministers and with the management of the bank.
The executive directors of the World Bank on Thursday approved the Washington-lender's proposal for a two-year interim economic strategy for Iran. The United States voted against the proposal because of the country's record on terrorism and human rights.
"It is U.S. policy to oppose multilateral lending to Iran for both terrorism and human rights reasons," said one Bush administration official. "We also continue to be concerned about the economic policy environment and believe it is premature to resume World Bank lending there."
Meanwhile a spokesman for the U.S. Treasury said that while it was pretty clear that a majority on the 24-member board of the World Bank favors the plan: "We don't think it's a rational move right now."
The spokesman added that the United States believes it is important to support "reformist elements," and that it does not believe the current proposal does that.
However, Merrell Tuck, a spokeswoman for the World Bank said that the proposed program is a cautious one which gives backing to reforms.
"The strategy proposes a cautious stand where the bank will fully monitor progress on governance, structural reforms and economic management," Tuck said.
She stressed that the World Bank board meeting on Thursday was not to approve a loan, only to approve a strategy for the country. However, the strategy would be backed by some $755 million in lending. But Tuck said that the bank does not foresee putting this lending to the board for a vote for at least another year. The lending would require a separate vote.
"Any lending would focus on basic needs and the environment," she said.
Even though it is the single largest shareholder of the global lender, the United States, on its own, cannot actually prevent a loan from going through. But one bank insider said that the board usually tries to move in a consensus style so there is usually an effort to negotiate the differences.
The United States has been under pressure from domestic politicians to oppose the plan for Iran. In a letter to Treasury Secretary Paul O'Neill, 89 members of Congress outlined their objection to the plan.
"The approval of lending of this type serves to undermine support for the World Bank and other international financial institutions," the letter said.
The United States has economic sanctions in place against Iran. While the Bush administration has said that it opposes a congressional move to extend these sanctions for another five years, President George W. Bush made it clear in April that he does not feel it is time to lift sanctions on Iran altogether.
All times are PT (US)
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