Important European Financial Firm Bows to Trump’s Iran Sanctions
Posted November 5, 2018 5:23 p.m. EST
An important cog in the global financial system has succumbed to pressure from the Trump administration and severed ties with Iranian banks.
Belgian-based SWIFT, whose messaging service connects more than 11,000 financial institutions as they transfer money around the world, said it was disconnecting from Iranian banks after the United States announced sanctions against 50 of the country’s financial firms on Monday.
The service declined to say whether it was cutting off all the targeted banks. But on Friday, Steven Mnuchin, the Treasury secretary, said SWIFT must cut off any Iranian bank on the list.
SWIFT’s decision will help the Trump administration isolate Iran’s government. But the move could deepen the United States’ rifts with the European Union and strengthen the bloc’s resolve to set up a payments system that can operate apart from Washington’s influence. The EU said this year that it was working on such a system, but it faces big obstacles. Payments channels are complex and need to be secure. No European country has agreed yet to host the entity for fear of U.S. retaliation.
In a statement, Swift described its move to suspend certain Iranian banks from its service as “regrettable” but said it had been done to maintain the stability and integrity of the global financial system.
The Trump administration announced in May that it was withdrawing from the 2015 Iran nuclear agreement and reimposing sanctions in an effort to secure a new deal with Iran’s government.
The European Union has moved to preserve the 2015 accord and has worked to maintain Iran’s economic ties with the rest of the world. But there may be little the bloc can do.
Large global companies, facing the prospect of being shut out from the U.S. market if they continue doing business in Iran, have stayed away from the country.
Large international banks have been especially wary of doing business in Iran. In the past decade, the United States hit several banking giants with stiff penalties for helping customers evade U.S. sanctions against Iran.
Because U.S. banks cannot do business with Iran, and large European banks have chosen to stay away from the country, Iran’s banks already were cut off from most of the global financial system before SWIFT’s decision. As a result, SWIFT’s withdrawal may inflict less of a blow than some might expect, some sanctions specialists said.
“The impact this time will not be as big as before because they are already isolated, but it will make it harder for them,” said Katherine Bauer, a fellow at the Washington Institute for Near East Policy.
SWIFT cut off Iran’s banks when the Obama administration imposed sanctions against the country in 2012. Back then, though, the European Union also introduced rules in support of sanctions, and as an entity within the bloc’s jurisdiction, SWIFT had little legal choice but to disconnect.
Even though Western banks have largely withdrawn from Iran, proponents of tough measures against Iran’s government pushed SWIFT to cut ties, worried that Iran’s leaders could use it to avoid the United States’ sanctions. But they asserted that the approach would be effective only if SWIFT actually cut ties with all the entities on the list.
“If SWIFT disconnects all the designated banks, this is truly a tougher policy,” said Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies, a group that supports sanctions against Iran, “If SWIFT doesn’t, this is a weaker policy with better spin.”