IRAN — The president of Iran has ordered the country’s leading banks to transfer billions of dollars of assets from Europe to the Central Bank to prevent them being frozen by international sanctions, according to Western diplomats.

The funds are being moved to Tehran through a secret network of “front” companies set up in Gulf states such as Dubai.

Mahmoud Ahmadinejad ordered the move amid growing concern that Iranian banks would soon be subject to strengthened European Union-level sanctions. But his action has caused friction with the governor of the Central Bank, Tahmaseb Mazaheri. The Iranian press has reported that he may resign over the issue.

This would constitute a serious blow to Mr. Ahmadinejad’s already battered reputation for economic competence. Mr. Mazaheri has only been in the job nine months after he replaced Ibrahim Sheibani, who resigned over the Iranian president’s attempts to control the activities of the state’s banks.

Mr. Ahmadinejad was dealt a serious blow in April when the economy minister resigned accusing the government of implementing “unscientific” policies.

The European Union has come under pressure from America to impose sanctions against Iranian banks suspected of financing Tehran’s controversial nuclear program and international terror groups in Iraq and Lebanon.

For the past year, the Bush administration has been targeting Iranian banks in an attempt to deny Mr. Ahmadinejad finance for the nuclear program. Intense pressure has been applied to Western banks and companies not to do business with Tehran.

Washington also succeeded in persuading the U.N. Security Council to monitor the financial dealings of two Iranian banks — Bank Melli and Bank Saderat — as part of the new sanctions imposed against Iran last March under resolution 1803. Washington, with Britain’s support, is pressuring the United Nations to take firmer action against a number of Iranian banks, while Brussels is considering restrictions of its own over Tehran’s refusal to call a halt to its uranium enrichment program. According to reports received by Western diplomats, officials at Bank Melli have been ordered by the Iranian government to smuggle assets held in Europe back to Iran. This follows a surprise raid by German financial investigators last month on the Bank Melli in Hamburg. The bank was ordered to freeze its activities until a thorough examination had been carried out.

E.U. officials are considering whether to ban the bank from operating in E.U. member states.

But Western officials fear most of the bank’s assets will have been repatriated to Iran before any ban comes into force. They are particularly concerned at the role of Dutch banks in helping to transfer funds back to Tehran via Dubai.

Although there is no suggestion that the Dubai government is involved in the smuggling operation, the Gulf state is known to have close trading ties with Iran and there are an estimated 10,000 Iranian companies based in Dubai, making it difficult for Western officials to detect unusual financial transactions.