SWIFT Pressured to Ban Iran Over Nuclear Ambitions

Written by Ralph E. Stone. Posted in Opinion, Politics

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Published on February 22, 2012 with 2 Comments

By Ralph E. Stone

February 22, 2012

Under pressure from the United States and the European Union, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), based in Belgium, is expected to ban Iran’s forty banks and institutions from using SWIFT to process its financial transactions, which would effect Iran’s foreign trade and access to international payments. United Against Nuclear Iran, a powerful U.S.-based group, had been lobbying for the past month for SWIFT to end its relationship with Iran.

More than 40 Iranian banks and institutions use SWIFT to process financial transactions. Iran could try to skirt the expected cutoff, but it would be difficult, costly, and time-consuming.

The average Iranian would also be effected as prices for household goods would soar while the value of Iranian currency drops.

The ban from SWIFT’s respected network will also escalate global economic pressure on Iran to halt its suspected development of nuclear weapons. It may also be an attempt to forestall threatened military action by Israel.

Iran says it is producing enriched uranium to fuel civilian power plants and has refused international demands to halt its production.

SWIFT is the financial equivalent of the United Nations. It facilitates the bulk of the world’s cross-border payments. The member-owned cooperative has been described as the ‘glue’ of the global banking system with the value of daily payments using SWIFT estimated at more than $6 trillion. SWIFT is vital to international money flows, exchanging an average 18 million payment messages per day between banks and other financial institutions in 210 countries.

SWIFT is not a bank and does not hold funds. SWIFT member-banks are responsible for the content of these messages and complying with applicable financial sanctions; they are not monitored or controlled by SWIFT. It is involved in 80 to 90 percent of all global payments. SWIFT does not carry out transactions; it is only a messaging system more akin to a telephone service. SWIFT does not hold accounts for members and does not perform clearing or settlement.

A ban would be the first country in SWIFT’s history to be expelled. If SWIFT gives in over Iran, it may well face calls to shut out other countries. By banning Iran, SWIFT will lose its independence and set a dangerous precedent.

In related news, the U.S. enacted sanctions that would punish countries and institutions if they do not reduce their purchases of Iranian oil by mid-year.

Last month, the EU also imposed tough sanctions against Iran, which includes a freeze of the country’s central bank assets and an oil embargo set to begin in July. In retaliation, Iran has halted oil shipments to Britain and France. In addition, the National Iranian Oil Company has sent letters to some European refineries with an ultimatum to either sign long-term contracts of two to five years or be cut off. It is not clear which countries were sent the ultimatum, but Spain, Italy and Greece are among Europe’s biggest buyers of Iranian oil.

Iran produces just over 5 percent of the world’s crude, which doesn’t seem like a lot. Yet, the expected bans will likely cause higher oil prices resulting in higher energy bills for consumers and possibly exacerbate the economic problems in the Euro Zone and globally, thus slowing economic recovery.

There is the possibility that Saudi Arabia could make up for some, but not all, of the banned Iranian oil.

Iran has warned several times it may seal off the Strait of Hormuz, choking off the supply of Gulf crude and gas from other producers. Or short of a blockade, it could harass ships coming through the Strait. Reportedly, a U.S. battleship and other military ships are lurking near the Strait of Hormuz, supposedly ready to enforce an Iran oil embargo and to keep the Strait open to other ships. This, of course, might precipitate a full-blown conflict.

On February 20, 2012, the International Atomic Energy Agency team paid yet another visit to Iran, the second in less than a month. Again, questions were raised about how much access the visiting inspectors would have to the country’s nuclear facilities. And last week, in a letter to the EU, Iran called for new talks with the U.S., Russia, China, France, Britain, and Germany. As Yogi Berra once said, “It’s déjà vu all over again.”

Will the ban on Iranian use of SWIFT to process its financial transactions coupled with other economic sanctions, force Iran to cave in to UN Security Council pressure to cease its uranium enrichment program? Or will this ongoing financial war and on-again-off-again inspections and “talks” turn into a military conflict?

Ralph E. Stone

I was born in Massachusetts; graduated from Middlebury College and Suffolk Law School; served as an officer in the Vietnam war; retired from the Federal Trade Commission (consumer and antitrust law); travel extensively with my wife Judi; and since retirement involved in domestic violence prevention and consumer issues.

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2 Comments

Comments for SWIFT Pressured to Ban Iran Over Nuclear Ambitions are now closed.

  1. Stone merely recites what we all know from the mainstream media with no analysis. And what does Garrison find “disgusting”?That an anti-semitic Iran is trying to get nuclear weapons or that the international community is trying to prevent that from happening?

  2. Disgusting, but utterly predictable.