February 14, 2011 / 6:10 PM / in 8 years

UPDATE 1-International banks suspend Ivorian operations

* Two international banks suspend Ivorian operations

* Bank closures caused by clearing, security problems

* Move seen undermining Gbagbo’s grip on power

(Adds analyst comment)

By Tim Cocks and Ange Aboa

ABIDJAN, Feb 14 (Reuters) - Two large international banks suspended operations in Ivory Coast on Monday in a move likely to weaken incumbent leader Laurent Gbagbo’s grip on power in the world’s top cocoa producer.

The West African nation has been in turmoil since a disputed Nov. 28 presidential election between Gbagbo and rival Alassane Ouattara. Both men have declared victory, and the standoff has threatened to rekindle the 2002-3 civil war that the poll was meant to draw a line under.

French bank BNP Paribas’s Ivorian unit, the second biggest banking operation in the country, was closed due to security concerns, an official said.

Citibank also said it would be closed on Monday, giving no official reason but saying it would continue to monitor the situation.

The United States, the European Union and African countries have heaped pressure on Gbagbo to step down, including measures to cut off his access to cash to pay salaries to civil servants and the soldiers that support him.

“Private banks shutting down, in addition to everything else that has been done, can only weaken Gbagbo’s position,” said Tara O’Connor of Africa Risk Consulting. “The faucets are been turned off. The question is how long this can continue.”

BNP Paribas, along with number one Societe Generale which has not commented on its operations on Monday, between them have around two thirds of the Ivory Coast market.

Citibank is a smaller operation with no retail arm but is the largest corporate financer for Ivory Coast’s oil and gas operations, the main creditor of its 80,000 barrel a day refinery, and the third biggest cocoa export financer.

Gbagbo’s planning minister condemned the bank closures and said they were breaking the law.

“The entire BICICI network is closed until further notice,” the official, who could not be named because of death threats against other banking staff, told Reuters. “I’m staying home.”

A spokesperson for Citi in Paris said the bank was closed on Monday and the bank was monitoring the situation, adding it had been experiencing clearing problems due to severed ties with the regional West African central bank.

West Africa’s monetary union last month cut off Gbagbo’s access to state accounts at the BCEAO central bank, saying it would only recognise Ouattara’s representatives.

“It was becoming very difficult for those banks to operate in Ivory Coast because they can’t use the BCEAO platform any more,” Standard Bank analyst Samir Gadio said, adding there was a “reputational risk if they continue to operate in Ivory Coast ... (and are) seen as allowing Gbagbo’s regime to survive”.

ENDGAME?

Western nations have slapped travel bans and sanctions on a range of individuals and organisations backing Gbagbo.

Cocoa exporters have also stopped registering new beans for export as a result of the sanctions, and a ban called for by Ouattara. Cocoa futures touched their highest levels in over a year on Monday as fears grew the ban, initially put in place on Jan. 24 for one month, would be extended.

Cocoa dealers have said tougher access to credit could also hinder cocoa operations in coming weeks.

Ivory Coast cocoa exporters said they feared for their future after Ouattara’s comments.

Ouattara remains trapped in a lagoon-side Abidjan hotel, protected by U.N. peacekeepers while Gbagbo, who has the backing of the military, remains in control of government buildings.

“The government condemns the illegal character of this decision ... By proceeding with their closure, BICICI and Citibank are ... seriously contravening their obligations under banking law,” budget minister Kone Katinan said on state TV.

“(We) will not tolerate these acts of defiance.”

After being cut off from the regional bank, Gbagbo sent soldiers to seize its Abidjan unit and appropriate local reserves, forcing the bank to close its Ivory Coast operations completely and causing problems with liquidity and clearing.

Banking sources say the military has since intimidated banks into participating in a new clearing system set up in the building Gbagbo seized. Some have received death threats.

“Gbagbo is not going to leave just because the banking system has shut down ... he will leave the day his life is at stake,” Gadio said. “But this is going to speed up the endgame. I don’t see how the salaries are going to get paid.” (Additional reporting by David Lewis and Richard Valdmanis; Editing by Maria Golovnina)

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