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 Tahmaseb Mazaheri, the governor of the Central Bank. The Iranian press has reported that he may resign over the issue.

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