Imagine this. Suppose the UN Security Council were to impose financial sanctions on Iran, supported by the U.S. The U.S. moves to implement the sanctions, forcing U.S. banks to cut off their relationships with Iranian banks. Now suppose that there is a financial institution based in the British Virgin Islands that moves in to fill the gap, providing credit to Iranian banks previously supplied by U.S. banks. Moreover, suppose the owner of this financial institution in the British Virgin Islands was based in the U.S.
This wouldn't be allowed, right? The Treasury Department would do everything in its power - and their powers are considerable - to keep this person and this financial institution from undermining U.S. foreign policy.
Now suppose that we are talking about international debt relief. Suppose that there is a huge international movement to stop the poorest countries in the world from being forced to cut spending on education and health care so they can service debt to the richest countries in the world and the international financial institutions, like the IMF and the World Bank. Suppose this movement in successful in getting the creditors to agree that much of this debt should be written off in the broad interest of humanity. Now suppose a "vulture fund" based in the British Virgin Islands swoops in and buys some of the debt that is supposed to be canceled, and demands full payment. Suppose a British court rules that the claim is valid, maybe not the full amount, but enough to severely undermine the international debt relief program in the case of Zambia.
This wouldn't be allowed, right?
But it is being allowed, the BBC reports. The British Virgin Islands-based financial institution is Donegal International. The owner is Michael Sheehan. He has an office in Washington, D.C.
Why is the U.S. government allowing this? Why isn't Congress compelling the Treasury Department to take action to stop it?
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Robert Naiman, Just Foreign Policy, February 20, 2007