By Otto J. Reich & Ezequiel Vázquez-Ger - 08/06/12 02:14 PM EDT
Last month the Ecuadorian press widely published evidence of President Rafael Correa’s efforts to establish a financial mechanism that would allow Iran to move money easily throughout Latin America, in effect hiding Iranian money in Ecuador’s banking structure.
Negative public reaction to the articles forced Correa — and his cousin Pedro Delgado, who is also president of the Central Bank — to finally admit that Ecuador was, in fact, negotiating the opening of accounts by the government-administered Bank Cofiec in Iranian banks. After years of official silence, they also said that there was nothing illegal in the accounts, and that the banking relationship with Iran was strictly for commercial reasons. After the articles appeared, however — and after members of the Ecuadorian National Assembly and the press began inquiring — the CEO and other members of the suspect Bank Cofiec quit their jobs. This is a drastic move, if their actions were just “commercial.”
1) Delgado had meetings in three banks in Moscow in February of this year. One of them was Bank Melli, an Iranian bank that has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Controls (OFAC) due to its businesses with Iran’s Defense establishment. Furthermore, according to internal memoranda, Delgado tried to sell Bank Cofiec to the Export Development Bank of Iran (EDBI), a bank that has also been designated by the U.S. Treasury Department. Why does Delgado insist on having meetings with banks that have been sanctioned by the United States? Is it true, as we have been shown, that he opened safe deposit boxes in another Moscow bank, and deposited $500,000 in cash? If so, where did that money come from? Why was it in Delgado’s hands?
2) Also in February, a delegation from Petroecuador, Ecuador’s state oil company, flew to Iran with the goal of “advancing relations” between both countries. On February 25, there was a meeting in the Iranian Petroleum Ministry in Tehran with the presence of delegates from Petroecuador, the National Iranian Oil Refining and Distribution Co. and the Export Development Bank of Iran. During the meeting EDBI offered a $400 million dollar credit line to Petroecuador. How does Correa intend to implement this credit line since EDBI has been banned from making international transactions?
3) Between July 2009 and July 2011, Ecuador signed four contracts with PetroChina that committed Ecuador to selling a total of 385,560,000 barrels of oil in the next four years at highly discounted prices (between $2 and $8 per barrel below the spot price). Considering that this transaction will cost the Ecuadorian people around $2 billion, who are the intermediaries who are profiting from an operation so financially detrimental to Ecuador? Furthermore, Ecuador signed an irrevocable letter in favor of PetroChina through which the latter is granted the right to seize any Ecuadorian oil sold to another company other than PetroChina and the China Development Bank in case Ecuador does not fulfill the contracts. Why has Correa decided to grant China such control over Ecuador’s sovereignty and oil resources? In addition, according to bills of lading in our possession, the aforementioned oil is not being shipped to China, but to the United States and Panama. Since Iran is one of China’s main oil suppliers, is it possible that Ecuador is swapping oil deliveries with China to benefit Iran?
4) Why does Correa insist on strengthening financial relations with Iran even though Ecuador’s trade with that country is minimal, and given the high risks that this relationship implies for Ecuador’s financial system? Could the answer be that he has decided to help Iran move money throughout Latin America? U.S. Ambassador to Ecuador Adam Namm has said that although Ecuador is free to have bilateral relations with any country in the world, it could have to contend with sanctions from the United States if it infringes on U.S. sanctions regarding Iran. He also said that officials from the U.S. Treasury Department went to Ecuador months ago to explain this situation in person.
The evidence of the above financial chicanery is in the hands of the U.S. government. The government has a responsibility to enforce U.S. law. If Delgado has indeed broken the U.S. Iran Sanctions Act, as the evidence indicates, the very least the United States should do is designate Delgado and the Central Bank of Ecuador. Delgado has properties and businesses in the United States and still holds a valid U.S. visa. Why is someone who is actively collaborating with Iran on behalf of a foreign government still enjoying the privileges of U.S. hospitality?
Reich is a former U.S. assistant secretary of State for the Western Hemisphere under former President George W. Bush and U.S. ambassador to Venezuela. Vázquez-Ger is an associate at Otto Reich Associates LLC and member of the non-profit organization The Americas Forum.