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World Bank agrees loans to Iran

By Stephen Fidler in Washington
The Financial Times
May 19, 2000

The World Bank board of directors on Thursday approved its first loans to Iran in seven years despite US opposition but indicated it would be some time before further loans were granted.

At a two-hour meeting, the 24-member board voted overwhelmingly in favour of the two loans, which totalled $232m, including the director who represented Israel.

The US, the bank's largest shareholder, cast the only vote against the loans, while France and Canada were the only abstentions.

The US must by law vote against the loans for any government on the state department's list of state sponsors of terrorism. Iran is one of seven countries on the list.

The decision had been delayed twice because of US pressure and Madeleine Al- bright, the US secretary of state, had led a diplomatic effort to engineer a postponement of loans because of the trial of 13 Jews accused of spying in Iran.

James Wolfensohn, the bank's president, who chaired the meeting, said several shareholders expressed deep concern with events in Iran - "in particular their concern that their support of these projects [should] not be construed as support for current events".

Worries were also expressed by some directors that momentum for economic reform was weakening. The bank said it would be at least six to nine months before any further loans for Iran were considered, and that would happen only if efforts at reform yielded results.

But many directors at the meeting spoke against what they called the politicisation of the bank, and said loans should be granted on economic criteria only. The loan was viewed favourably, some directors said, because financing the Tehran sewerage system and primary healthcare addressed human needs. The loans were also seen as helping the reform efforts of President Mohammad Khatami against conservative elements.

The bank's decision was condemned by some Congress members. Jesse Helms, chairman of the Senate foreign relations committee, said the bank was already being criticised for "subsidising vile resettlement policies in China".

Sam Brownback, a senior member of Mr Helms's committee, said the granting of the loans at a time of significant political turmoil in Iran was questionable economically as well as politically. Ayatollah Ali Khamenei, Iran's supreme leader, halted the recounting of votes in Tehran, according to state-run radio. This in effect confirmed that reformists had won control of parliament for the first time since the 1979 revolution, AP reports from Tehran.

The intervention means that the reformists, who won 29 of the 30 seats in Tehran in legislative elections in February, will be allowed to take most of those seats.


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