World Bank Vows a Big Loan to Iran

WASHINGTON — The World Bank is defying requests from an influential congressman to stall nearly $900 million in loans to Iran.

Earlier this year, the president of the World Bank, Robert Zoellick, who before taking that office served in a top Bush administration foreign policy post, declined a privately made request from Rep. Mark Kirk, a Republican from Illinois, to suspend the loans. World Bank spokesmen told The New York Sun that the bank will go ahead with the loans.

Mr. Kirk, who serves on the subcommittee that approves America's share of the World Bank's funds, is warning that the loans will undermine recent American and Western moves to exert pressure on Iran. American sanctions on Iran's largest banks and largest branch of its military are designed to prevent Iran from building nuclear weapons and to punish Tehran for its support for terrorism and attacks on American soldiers in Iraq.

Mr. Kirk said that senior National Security Council staff told him that they did not think the World Bank loans were helpful to the American strategy of applying economic pressure to Iran to persuade the mullahs to end their enrichment of uranium in Natanz. A spokesman for the National Security Council offered no comment when asked on Thursday and again on Sunday.

"It sends a message that directly undercuts Western diplomacy with regard to Iran," Mr. Kirk told the Sun. "In the Iranian cabinet they will say, 'Although these governments have just criticized us, they just sent us a check from the World Bank.'"

For now, Mr. Kirk is pursuing pressure on the World Bank through his post on the appropriations subcommittee that funds foreign operations. The chairwoman of that subcommittee, Rep. Nita Lowey, a Democrat from New York, has yet to take a position on holding up funding to the World Bank.

Mr. Kirk said he has been pushing the World Bank since August to review the loans it initially made in 2004 and 2005 for earthquake relief. "When I initially talked to him, he said they are not approving any new loans," the congressman, who once served himself at the World Bank's International Finance Corporation, said. Then, when Mr. Kirk asked Mr. Zoellick, about the loans of about $870 million for Iran scheduled to be disbursed in the next three years, the World Bank president responded, according to Mr. Kirk, "Oh that."

"He said, 'I don't know if I can stop that,'" Mr. Kirk said. "I said, 'Think of the embarrassment if the U.N. Security Council approves three separate sanctions, and the United States imposes its own unilateral sanctions and three blocks away the World Bank cuts a check to the Ahmadinejad government.'"

A spokesman for the World Bank, who asked that his name not be used, yesterday said, "President Zoellick does not comment on private conversations."

The spokesman said that the loans to Iran were not forbidden by the two U.N. Security Council sanctions already imposed on Iran. "The bank adheres to the requirements of UN Sanctions frameworks. In relation to Iran, the Security Council resolutions exempt activities by international financial institutions for humanitarian and development purposes. The bank has been in touch with the Security Council sanctions committee on Iran to insure the bank acts consistently with the sanctions framework, which prohibits dealings with designated individuals and entities."

Currently, the main Iranian bank handling the World Bank transactions is Bank Melli, an institution designated last month by the American Treasury Department as financing the country's nuclear program. World Bank officials told the New York Times in a story published Sunday that the World Bank was looking to support the current projects through alternative methods in light of the new American sanctions.

Mr. Zoellick, who served as President Bush's first trade representative and was one of the original foreign policy advisers on his 2000 campaign for president, replaced Paul Wolfowitz as president of the World Bank after a campaign from within the bank forced Mr. Wolfowitz's ouster amid complaints about the handling of a pay increase for his girlfriend, a World Bank employee at the time.

The loans to Iran present Mr. Zoellick, in the first year of a ten-year term, with his first challenge between his loyalties to President Bush and his role overseeing the international institution. The loans themselves include a project to improve access to health care for rural Iranians; improvements to Tehran's sewage system; an air and water quality monitoring project; and relief for the Bam earthquake.

Mr. Kirk said Mr. Zoellick as president of the bank cannot overrule the bank's stakeholders on its executive board. However, he said that if Mr. Zoellick asked the largest stakeholders again, he would likely find a majority of votes to halt the loans.

"The board has made a decision to spend the money. He does need a decision from the donors. The donors are in order, the Americans, the Japanese, the Europeans and the Saudis. That is by far the center of gravity on the board. With Sarkozy coming to speak before the Congress on Tuesday and clearly a changing view on Iran in Saudi Arabia, I think the board would be open to reconsidering these loans," Mr. Kirk said.