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US pressures SWIFT to cut off Iran from global banking transactions to enforce sanctions

US pressures SWIFT to cut off Iran from global banking transactions to enforce sanctions
The US aims to disconnect Iran from the SWIFT global payment network as part of new economic sanctions against the Islamic Republic in November. Disconnection from network would make it difficult for Iran to get paid for exports.

“I can assure you our objective is to make sure that sanctioned transactions do not occur whether it’s through SWIFT or any other mechanism,” US Treasury Secretary Steven Mnuchin told Reuters on Sunday. “Our focus is to make sure that the sanctions are enforced.”

After tearing up the 2015 Iran nuclear deal (JCPOA) in May to introduce sanctions against the Islamic Republic, the first round of American punitive measures targeting metals trading, coal, industrial software, and the auto sector took effect in August.

A second round, scheduled to take effect on November 4, will target Iran’s oil sales and the central bank.

While the Trump administration is pressuring its allies to cut Iranian oil imports to “zero” next month, the White House also seeks to hit Tehran hard by cutting the country off from SWIFT, a Belgian-based financial messaging service. In doing so, Iran would lose its ability to be paid for its exports and to pay for imports.

In 2012, the EU imposed sanctions on Iranian banks, forcing SWIFT, which is subject to EU laws, to cut financial transactions with at least 30 of Iran’s financial institutions, including the central bank.

Iranian banks were reconnected to the network in 2016 after the Iran nuclear deal came into force, allowing much needed foreign cash to flow into Tehran’s coffers.

Now Washington is once again exerting pressure on its European allies to force SWIFT to cut off Iranian banks from financial transactions, allowing only transactions that deal with humanitarian aid to the country. “We want to get to the right outcome, which is cutting off transactions,” Mnuchin said.

As President Donald Trump tries to tighten the noose on Iran, cutting Tehran off from SWIFT might be a far-fetched idea – as long as Germany, France, and the UK remain parties to the Iran nuclear deal.

READ MORE: Iran considers SWIFT payment system alternative to bypass US sanctions

In fact, the other two members of the nuclear agreement – Russia and China – are both pursuing their own payment systems to bypass the SWIFT network. Germany has also recently suggested creating a rival European payment system based on the euro in order to bypass US sanctions.

SWIFT is a financial network that provides high-value cross-border transfers for members across the world. It is based in Belgium, but its board includes executives from US banks with US federal law allowing the administration to act against banks and regulators across the globe. It supports most interbank messages, connecting over 11,000 financial institutions in more than 200 countries and territories.

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