TEHRAN -- A defiant Iran announced yesterday that it has begun pulling its foreign currency accounts out of European banks to protect its assets from possible UN sanctions over its nuclear program.
As analysts estimated the amount of those funds at up to $50 billion, Iran also called for a reduction in Organization of Petroleum Exporting Countries oil production -- raising the possibility that the country would deploy its oil prowess in its standoff with the West.
Underlining his challenging stance, Iran's hard-line president, Mahmoud Ahmadinejad, held a meeting in Damascus yesterday with leaders from the Palestinian militant groups Hamas and Islamic Jihad.
The meeting came a day after an Islamic Jihad suicide bomber blew himself up in a Tel Aviv restaurant, wounding 20 people. Israel accused Iran and Syria of being behind the attack, a charge both countries denied.
The currency withdrawal signaled that Iran was willing to weather UN punishment rather than abandon its nuclear ambitions, which the United States and some in Europe say are to develop atomic weapons. Tehran insists its program is for peaceful purposes only.
Yesterday's move also deprives Europe of an important lever to influence Iran and could weaken its resolve to push Iran to give up key parts of its nuclear program, analysts said.
Even more daunting is the possibility that Iran -- which has the world's fourth-largest reserves of oil -- could try to put a squeeze on petroleum.
Crude oil prices rose above $67 yesterday amid concern over the Iranian nuclear dispute, unrest in Nigeria, and Al Qaeda's threat of terrorist attacks in the United States.
It is feared that oil prices could surge much higher -- even beyond $100 a barrel -- if the UN Security Council imposes trade sanctions on Iran over its nuclear activities.
Iran's Oil Ministry confirmed yesterday that the country is pushing for OPEC to cut its overall production.
Ministry spokeswoman Souzan Shakourzadeh said the move was connected to the expected fall in demand for oil in the second quarter of 2006, and not to the nuclear dispute. She could not say how large a cut Iran is seeking.
Iran pumps about 4 million barrels of oil a day, making it the second-largest producer in OPEC after Saudi Arabia.
The announcement of the withdrawal of Iran's foreign currency accounts from Europe came from the country's
''We transfer the foreign exchange reserves to wherever we deem fit," Sheibani was quoted as saying by the semiofficial Iranian Students News Agency. He would not say how much money was involved or where Iran would move it.
It was not immediately clear whether Iran's investments and property in Europe would be affected.
Iran's assets in the United States were frozen shortly after the 1979 revolution that toppled the pro-Western Shah Mohammad Reza Pahlavi and installed a clerical regime.
Economists said the impact on the global economy would be muted since the amount is not large in comparison to other countries' reserves, and since there was no sign the money would be shifted from dollars and euros to other currencies.
Analysts put the amount of Iran's funds in Europe at $40 billion to $50 billion -- far below the holdings of countries like China, which had $819 billion at the end of December.
Swiss officials were tightlipped over whether Iran's move might include Switzerland, which is not part of the European Union, or if it meant more Iranian money might be on the way.
Peter Westin, chief economist for Moscow investment bank MDM Bank, said that Iran's good relations with Moscow made it a possible destination for Iran's foreign currency reserves. ''In that sense Russia is a good option," he said.
European powers have drafted a resolution that calls for referring Iran to the council, but stops short of asking for imposition of punitive measures against Iran. The International Atomic Energy Agency, the UN nuclear watchdog, will meet Feb. 2 to discuss the draft.
Momentum gathered yesterday for Europe to take steps against Iran. Italian Foreign Minister Gianfranco Fini said Iran's nuclear program was testing the world's resolve.