Iran is about to lose access to one of the quickest and safest ways to receive money via electronic bank transfers, as the United States prepares to disconnect Iran from the SWIFT global payment network as part of a hard-hitting sanctions package that will kick in early next month.
“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,” the U.S. Treasury Secretary Steven Mnuchin told Reuters last week, referring to the Society for Worldwide Interbank Financial Telecommunication system.
Mnuchin declined to give details of the talks with the executives of SWIFT, but noted that, “our focus is to make sure that the sanctions are enforced.”
SWIFT is a global financial messaging service that connects more than 11,000 banks. While SWIFT is based in Belgium, its board includes executives from American banks. SWIFT is subject to European Union law. In 2012, when the EU imposed sanctions on Iranian banks, financial transactions with at least 30 of Iran’s financial institutions, including the central bank, were cut. In 2016, following the implementation of the Iran nuclear deal, formally called the Joint Comprehensive Plan of Action (JCPOA), Iranian banks were reconnected to the network, bringing in much-needed cash.
In exchange for Iran curbing its nuclear program, international nuclear-related sanctions were lifted starting in January 2016 and under the terms of the JCPOA, as well as granting Iran access to frozen capital. But in May of this year, U.S. President Donald Trump announced that he was pulling the U.S. out of the nuclear deal. Trump threatened European and other global companies doing business with Iran with sanctioning.
While Trump has been tough on Iran and the effects of sanctions he reimposes will undoubtedly be felt throughout the Iranian economy, what difference prohibiting Iran from using SWIFT will make is unclear.
In September, foreign ministers from Britain, France, Germany, Russia, China and Iran agreed to establish a financial facility in the European Union to facilitate payments for Iranian imports and exports, including oil, to skirt American banking sanctions. What was dubbed the “Special Purpose Vehicle” would theoretically assist and reassure economic operators pursuing legitimate business with Iran, acting as an alternative to SWIFT.
Meanwhile, an informed source in the Central Bank of Iran (CBI) said on October 17 that efforts are being taken by the CBI to dump using the SWIFT system altogether, and transfer inter-bank financial messaging needs to another system, before the full package of American sanctions goes into effect in two weeks.
“In the field of financial messengers and with due observance to the problems that SWIFT may bring about for Iran, CBI is after replacing SWIFT with another financial messaging system,” the source added.