Julian Assange case: Ecuador accused of allowing Iran to evade sanctions

The pictures show a backslapping mood of bonhomie between a left-wing South American president and the radical Islamic leader of Iran. Meeting in the mountain-ringed city of Quito last January, Presidents Rafael Correa of Ecuador and Mahmoud Ahmedinejad of Iran looked best of friends as they waved from the balcony of the Spanish-built Carondelet Palace.

Just how much an austere Islamist like Mr Ahmadinejad and a flamboyant, US-educated Catholic like Mr Correa really have in common is anybody's guess.

But they do have a mutual dislike of America, a country described as "imperialist" by Mr Correa and as the "Great Satan" by Mr Ahmadinejad. And it is that same "enemy's enemy is my friend" spirit that has now led Mr Correa to spark a diplomatic storm with Britain, after allowing the WikiLeaks founder, Julian Assange, to take refuge in Ecuador's London embassy.

The dispute, which has seen Britain surround the embassy with police, revolves around fears that Mr Assange, who is wanted for questioning over sexual assault claims in Sweden, may then end up being handed to America for trial over his leaking of a mass of US diplomatic cables.

That Mr Correa's government has a highly questionable record on the very press freedom that Mr Assange claims to be a martyr is of little import: for Mr Assange, Ecuador's support represents a potential get-out ticket, and for Mr Correa, it is simply another chance to poke Uncle Sam and its loyal ally, Britain, in the eye.

Yet for many of Mr Correa's critics both at home and abroad, his tactical friendship with Mr Assange is indeed no more than that – a diplomatic nuisance, designed simply to make Mr Correa a new darling of the anti-American Left.

Of far greater concern, they say, is his burgeoning relationship with Iran – which, they claim, is now getting help from Quito to dodge the Western-backed sanctions imposed to stop it going ahead with its suspected nuclear weapons program.

Documents obtained by The Sunday Telegraph in Quito last week reveal that detailed plans have been drawn up to establish substantial banking mechanisms between the two countries, even though they lie 8,000 miles apart and have only the tiniest of trade links.

So why? After all, the raunchy nightlife of Quito is not going to attract Iranian tourists, for whom drinking and dancing is banned by religious decree. Nor do the bananas of which Ecuador is the world's largest exporter feature high on Tehran's import list.

Instead, the new financial ties have prompted suspicions that the real intention is to help Tehran circumvent sanctions by channelling funds through Quito.

"The trading links between the two countries are marginal, so this new orientation by our government can only be explained in ideological terms or hidden deals," said Cesar Montufar, an opposition leader who first helped reveal the Iranian ties last month.

"Correa wants to position himself as a representative of the radical left on a global stage. The Assange case fits with that strategy. And so does his approach to Iran."

What would make those links all the more appealing to Tehran is that Ecuador has used the US dollar as its own currency since a 2000 financial crisis brought the country to its knees. So any deal would give Iran, which is being choked of access to US dollars by international sanctions, immediate access to America's financial backyard.

The mullahs of the Islamic Republic are not alone in being lured by Ecuador's dollar economy and loose financial controls, however. Other far less pious customers are also believed to showing an interest, including global drugs cartels, money launderers and terror financiers, according to international financial crimes investigators and US anti-narcotics officials.

In the view of Jay Bergman, the US Drugs Enforcement Agency director for the Andes, the country has become a "United Nations" for organised crime, thanks partly to be its location sandwiched between the world's top two cocaine producers, Colombia and Peru. However, drug traffickers from as far away as Albania and China are using it as a staging ground to strike deals with cocaine cartels, he alleged.

In a further blow to Ecuador's reputation for financial probity, the Financial Action Task Force, a Paris-based inter-governmental body, blacklisted the country in June for failing to make sufficient progress in tackling money laundering and terrorist financing. A building boom in modern Quito is fuelled by the laundering of dollars there, locals say.

Mr Correa and the head of his central bank, Pedro Delgado, who also happens to be his cousin, refute such charges, indignantly arguing that Ecuador is a sovereign state that chooses with whom it does business.

"The Ecuadorean state does not carry out nor will it permit any type of money laundering," said Mr Delgado.

Mr Correa is a larger-than-life character, as indeed is his family. His wife is rarely seen in public, but other relatives more than make up for that.

His father was jailed in the US for smuggling cocaine when the president was a young man, and later committed suicide.

His cousin Mr Delgado, the central banker, appeared in wheelchair last month after allegedly being gored while watching a bullfight at a private party (he claimed that he hurt his ankle in a fall).

To many, Ecuador's populist president is a thinking man's version of his ally and former mentor, Hugo Chavez, the autocratic Venezuelan leader who has been fighting cancer this year.

Like Mr Chavez, another Left-wing firebrand and enemy of America, he enjoys a degree of genuine popularity. The holder of a master's degrees in economics from an American university, he has brought rare political stability to the country and won support among the country's poor for a battery of social programmes funded by booming oil revenues and his unilateral decision to renounce the country's international debts after he won office the first time in 2006.

Today, Mr Correa holds forth in his support for Mr Assange during his rambling three-hourly Saturday television speeches to the nation – a format he has copied from Mr Chavez and originally Cuba's Fidel Castro, who used to address his long-suffering people for hours.

In traditionally macho Latin America, Mr Assange's alleged sexual assault of two Swedish women has not raised as many concerns as in Europe. The actions for which he is under investigation "almost amount to a romance novel", Mr Correa's chief legal adviser Alexis Mera said on Friday.

Mr Correa's support for Mr Assange plays into both his domestic and global political aspirations.

If Mr Chavez succumbs to cancer, despite the attention of his Cuban doctors, that could open the way for Mr Correa to assume the role of US tormentor-in-chief. The Ecuadorean leader is also seeking to bolster his domestic standing ahead of presidential elections in February.

However, domestically, reaction to his backing for Assange varies.

"Julian Assange is the target of a witch-hunt by the US and their Western friends," said Betty Gomez, 28, a teacher.

"It's right that we should stand up for his rights and I'm delighted that our president has offered him a way to escape the persecution. The British are now just trying to bully us into handing him over."

But others question why Ecuador should be involved in the case.

"This is typical of Correa, always looking for some new platform to bash the US while cutting back on our freedoms at home," said Tomas Hernandez, 44, a shopkeeper.

Another strong critic of his Mr Correa is none other than his older brother Fabricio, a former ally, who now says he is going to run against him for he presidency in February.

"Today, drugs are rampant," he said in a scathing assessment earlier this year. "Crime has doubled. There is no investment. There are no jobs. The number of poor people has increased 50%.

"I have been taking care of my younger brother since he was little, and I have always know that he was like this. I thought that he had matured, and maybe he had, but the drug of power is very powerful, and even worse when he is surrounded by a perverse circle."

Mr Correa insists that the country has made fighting the drugs trade and financial crimes a national priority.

But Roger Noriega, a former US ambassador who now monitors Latin America at the American Enterprise Institute, a conservative US think-tank, scorns that claim.

"Correa is a little man in a little country running a very big risk," he said. "And his people will pay the price as the economy is isolated and as terrorists and drug traffickers take advantage of Correa's hospitality. In the meantime, these suspicious transactions with Iran should be investigated by the United States and the United Nations."

Meanwhile, although Mr Correa says he is taking a stand for free speech, his administration has closed 14 Ecuadorean media outlets so far this year alone. There is no hypocrisy, however, he insisted last week, telling a group of foreign journalists that the region's press is so corrupt that a different set of rules apply.

"Don't let yourself by fooled by what's going on," he said, before referring to the two American journalists who broke the Watergate scandal in the US.

"There is this image of the media as being about Woodward and Bernstein and the struggle for freedom of expression, but that's not the case here. The press in Latin America is totally corrupt."

Such words have a hollow rings to journalists at Vanguardia, the country's leading exposer of government corruption. Just last month, their offices were raided and their computers seized on the grounds that the labour ministry accused them of failing to fulfil a quote for disabled employees (a charge that the newspaper in any case denies).

And Orlando Gomez, an experienced Quito-based Colombian correspondent, was attacked by mystery assailants on motorbikes, the day after he wrote a piece accusing the Correa administration of hypocrisy over the Assange case.

"The Assange case is a brilliant opportunity for Correa to launder his image," said Mr Noriega.

"Here's a man who has used the police, regulators, and courts to harass journalists, TV stations, and newspapers that he disagrees with.

"Now he is strutting on the world stage as a defender of free expression ... and he is preening to succeed the cancer-stricken Chavez as the leader of the region's leftist authoritarians."