THE TELEGRAPH: STANDARD CHARTERED IS UNDER ATTACK, AND OUR CRAVEN POLITICIANS DO NOTHING

The great British bank had every right to trade with Iran, and the US must be told to back off.

A pedestrian walks past a Standard Chartered branch in the central business district of Hong Kong.

By Peter Oborne

6:10AM GMT 06 Nov 2014

Standard Chartered has a distinguished heritage. Its origins and reputation for probity, honesty and enterprise date back to the 19th century, when the two banks from which it was formed were set up to finance trade in the British Empire: the Standard Bank of British South Africa and the Chartered Bank of India, Australia and China.

Chartered first opened its doors in Bombay and Shanghai in 1858. Hong Kong followed a year later. Thereafter it followed the British Empire around the globe. Meanwhile the Standard Bank was playing a pioneering role financing the diamond fields of Kimberley.

These great institutions merged in 1969, and Standard Chartered has prospered because its values are rock solid in a world so often driven by the ephemeral. It was no surprise when it came through the 2008 collapse unscathed, unlike so many other British banks.

Since then, though, it has been downhill all the way. Today its directors are at each other’s throats, investors are in revolt, profits are in collapse, and its share price has dropped by a third this year, down by over 10 per cent in the last week alone.

If you read Britain’s financial press, you will learn that this was all the fault of Standard Chartered and, in particular, its hubristic, arrogant management. You will read how the bank was caught red-handed trading with the despotic and illegal Iranian regime. You will learn that the bank deserves to be punished and it is past time that the bank’s charismatic chief executive, Peter Sands, was ousted.

It is true that two years ago the bank was obliged to pay a $670 million penalty to the US financial authorities. It is also true that last week the US reopened its investigation into Standard Chartered, hence the latest collapse in the share price.

In every other respect, the conventional wisdom is laughably false. There is no evidence whatsoever that Standard Chartered has engaged in shoddy practices. It has broken no laws, flouted no international sanctions and done nothing wrong. The real story concerns arrogant, out of control US financial regulators, and cowardly British ministers who lack the guts and, above all, the simple patriotism to defend a great British system under siege.

This cowardice stretches right to the top: George Osborne and David Cameron have failed to come to the aid of one of our country’s greatest companies at a time of desperate need.

The facts are indisputable. Standard Chartered was fully entitled to facilitate international trade with Iran. It did not break sanctions imposed by Britain, by Europe or by the international community. However, it allegedly did fall foul of domestic United States legislation, passed by Congress and aimed at Iran, though even this is unproven.

In theory, it should be of no concern to America with whom a British bank does business, so long as it abides by the relevant international treaties. In practice, the dollar is the world’s reserve currency, which gives the US Treasury the ability to force all companies that deal in dollars to abide by the domestic jurisdiction of the United States. Since it is impossible for any international bank to avoid dealing in dollars, they are all vulnerable – and over the past few years the American financial authorities have started to use this power to the full.

At bottom, the action against Standard Chartered is financial blackmail. America effectively threatened to withdraw the bank’s US licence, thus destroying its worldwide business, unless it complied. At first Standard Chartered’s directors, knowing that they had done nothing immoral or wrong, held out against the threats. Eventually, however, realising that they simply did not have the power to resist, they humiliatingly settled with the United States. To this day, the bank’s officers are barred from talking about it either in public or in private.

This brings me back to the gutlessness of British ministers. As Chancellor of the Exchequer, George Osborne has a duty to defend British financial institutions against the hostile actions of a foreign government. But neither he, nor William Hague (then foreign secretary) nor David Cameron lifted a finger to help. When I spoke in private to a senior Treasury adviser two weeks ago, I was appalled to hear him defend the US power grab. To his great credit, Andrew Bailey, the Bank of England regulator, recently warned about the damaging consequences of the massive American fines on British banks – but he has received zero support from our politicians.

There is a shameful little secret about the neo-Conservative clique which today surrounds David Cameron. Its members claim to be Eurosceptic, and are habitually outraged when the European Union infringes British sovereignty (witness the latest row over EU funding). But they could not care less about far more serious US infringements on British sovereignty. Just imagine the outrage if the European Central Bank was abusing its regulatory powers to drive Standard Chartered and its 70,000 employees to the wall. We would never hear the end of it.

This deep cowardice at the heart of the British establishment helps explain an otherwise baffling paradox. The US has a far stricter sanctions policy against Iran than any major country, and yet its trade with Iran has steadily increased, up from $146 million in 2007 to $313 million last year.

Britain has a far less onerous formal sanctions regime, yet our trade with Iran has collapsed from $802 million in 2007 to only $125 million last year. In practice, major American companies find it fairly easy to get around sanctions through the application of domestic political pressure by well-placed Congressmen and Senators. In Britain, by contrast, we now timidly do what we are told – George Osborne would never dream of standing up for a British company against the US Treasury.

Apart from everything else, there is a serious democratic problem. Ministers have never once told Parliament about these powerful secondary US-inspired sanctions. They are just imposed, without discussion or challenge, by the United States.

The attack on Standard Chartered can only be fully understood in the context of a much bigger global story. For the past few years, we have been living through the dismantling of the global financial architecture created at Bretton Woods in the wake of the Second World War. With the US in relative decline, it is unable to resist the temptation to use the remains of its worldwide financial domination as a very clumsy instrument of foreign policy.

This, in turn, is leading to the emergence of a parallel financial system which bypasses the dollar altogether. China is at the heart of this new system. My guess is that the persecution of Standard Chartered and other banks will continue. Sooner rather than later, Standard Chartered will face a choice between financial ruin or migration to the Far East, where its early roots are so strong.

It will become, in effect, a Chinese bank. The loss of one of our greatest companies will permanently diminish Britain, and it will owe much to the inexcusable refusal of the British political establishment to stand up to naked American financial imperialism.

The Telegraph