THE US has bluntly dismissed an Iranian offer to swap nuclear fuel, which a senior US official said was inconsistent with a deal allowing Tehran to avoid further sanctions. The rebuff came yesterday amid revelations that more than $US2 billion allegedly held on behalf of Iran in Citigroup accounts was secretly ordered frozen last year by a court in Manhattan, in what appears to be the biggest seizure of Iranian assets abroad since the 1979 Islamic revolution.
The US government is intensifying efforts to use the global financial system to pressure Iran into giving up its nuclear program and support for terrorism.
Iran's Foreign Minister proposed that Tehran swap 400kg of low-enriched uranium for nuclear fuel in an exchange on the island of Kish, a free trade zone, as the first phase of a deal with world powers. But the US official said: "Iran's proposal today does not appear to be consistent with the fair and balanced draft agreement proposed by the IAEA (International Atomic Energy Agency) in consultation with the United States, Russia and France."
Many in the West suspect Iran is developing technology to enrich uranium to highly refined levels to build a nuclear bomb. Tehran says its nuclear program serves peaceful purposes.
The US official said the IAEA-brokered agreement was "an opportunity for Iran to begin to build confidence in the peaceful nature of its nuclear program".
On Friday, the White House warned Iran it faced "credible consequences" if it did not respond positively this month.
The legal order freezing the Citigroup accounts, executed 18 months ago by the US District Court for the Southern District of New York, has yet to be made public. The court acted in part because of information provided by the US Treasury Department.
The frozen $US2 billion stands at the centre of a legal struggle between Luxembourg's Clearstream Banking SA, the holder of the Citibank account, and the families of hundreds of US marines killed or injured in a 1983 terror attack on a marines barracks in Beirut.
Clearstream is primarily a clearing house for financial trades and is a wholly owned subsidiary of Germany's Deutsche Boerse AG. Luxembourg's bank secrecy laws have helped it grow into a European financial centre.
There is no indication that Citibank knew the funds may ultimately belong to Iran. US firms that do business with Iran face stiff penalties.
A federal judge in Washington ruled in 2003 that Iran orchestrated the bombing of the marines barracks and ordered Tehran to pay the victims' families $US2.7 billion in compensation.
Lawyers for the families are arguing that Clearstream is holding Iranian funds at Citibank and are seeking to seize the assets as payment for their clients.
"I was stunned when this money popped up in New York," said Steven Perles, a lawyer representing the victims' families. "I had no idea there was Iranian money of this size flowing through the United States."
The outlines of the dispute appear in judicial filings and in the federal court's docket sheets.
The documents show that Clearstream has denied it is holding funds for the Iranian government and that the European firm has been fighting to release the $US2 billion.
The court initially ordered Citibank in June last year to freeze $US2.25 billion of Clearstream's accounts, but the company's lawyers were able to get $US250 million released the following month, according to court records.
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