By Jon Hemming
DUBAI (Reuters) - Iran denied on Sunday it had failed to make payments on its loans to the World Bank for the last six months, blaming Western sanctions for preventing an intermediary from forwarding funds to the global lender, Iran's IRNA state news agency said.
The World Bank said on Thursday it was placing Iran's loans in non-performing status as Tehran had not paid back any of the money it owed for more than six months.
The designation from the World Bank, often a lender of last resort to cash-strapped governments, means Iran will be ineligible for any new World Bank funds and may find it even harder to get money from commercial creditors.
Iran owed the bank $697 million on June 30, of which $79 million was overdue.
Iranian Deputy Minister of Economy Behrouz Alishiri said the statement by the World Bank was "totally wrong".
Tehran had paid all its installments on time, IRNA quoted Alishiri as saying.
"Iran has reimbursed the installments of its debits to the World Bank through an advisor bank in due time but the advisor bank has refrained from transferring the sum," he said without naming the intermediary.
An Iranian minister met the vice-president of the World Bank in April to resolve the issue which, Alishiri said, had been created by the imposition of U.S. and EU sanctions targeting banks that deal with Iran's Central Bank.
Alishiri said that after discussion with the World Bank, its financial manager had said it had received permission from U.S. officials for the payments to be made, but yet they still did not go through.
"The World Bank ... knows well that imposing sanctions on central banks of the member states by the U.S. administration is tantamount to a declaration of war and a gross violation of international law," Alishiri said.
The World Bank said it is fully in compliance with international and U.N. sanctions against Iran.
Iran is struggling to cope with high unemployment and inflation which the incoming president this week put at 42 percent.
Poor financial management by the government of outgoing President Mahmoud Ahmadinejad are at least partly to blame, analysts say, but U.S., EU and U.N. sanctions on sanctions are wreaking economic havoc.
The United States and its allies have imposed hard-hitting sanctions against Iran's oil and banking sectors to choke off funding to a nuclear program which the West says is a drive to achieve a weapons capability. Iran says its nuclear program is for entirely peaceful purposes.
The sanctions nearly halved Iran's oil revenues in 2012 to around $50 billion-$60 billion. Iranian banks were disconnected from the global financial network, making payment transfers to or from Iran extremely difficult.
(Editing by Peter Graff)