Iran won't retaliate against Italy over bank-envoy

By Phil Stewart

ROME (Reuters) - Iran will not retaliate against Rome after the Bank of Italy took control of a branch of Iran's state-owned Bank Sepah following sanctions approved by the U.N. Security Council, Iran's envoy to Rome said on Wednesday.

Iran's President Mahmoud Ahmadinejad, without mentioning Italy, said earlier on Wednesday that Iran could retaliate over sanctions imposed on Iranian banks abroad due to U.N. concerns about Tehran's nuclear ambitions.

One of the affected operations was the Rome branch of Bank Sepah. The Bank of Italy announced last week it had assumed control of the Sepah branch.

Asked whether he believed there would be any retaliation in Italy, Ambassador Abolfazl Zohrehvand said: "No. Certainly our relations with Italy run deeper than these things. It seems that even this question will be resolved."

Italy is one of Tehran's largest trading partners and Zohrehvand said political ties between the two countries had improved since Prime Minister Romano Prodi took office last May.

He said the Rome branch of Sepah was not particularly important, compared with its other operations abroad, but said that Tehran had sent a formal request for information to Italy's foreign ministry.

"We did not request so much explanation from Italy because it was not so important," Zohrehvand said during an interview at Iran's embassy in Rome, while complaining that the operation was handled badly and could hurt small businesses.

"We gave them a statement. We asked for explanations," he said.