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The Trump administration has again imposed sanctions on Iran and, although companies and banks have severed their ties with Iran, the financial messaging service plays a crucial role in the transfer of funds around the system. international banking remains linked to Iran.
President Donald Trump's "America First" foreign policy faces an obscure hurdle in the heart of the global financial system.
The Trump administration has abandoned the nuclear deal with Iran this year and is reinstating sanctions against the country. Sanctions leave Western companies and banks facing a difficult choice. If they do business with Iran, they lose access to the US market and financial system. Unsurprisingly, companies and banks have broken their ties with Iran or have set aside their investment plans in this country. But an important financial link with the country remains: the financial messaging service which plays a crucial role in the transfer of funds around the international banking system.
The courier service is run by a Belgian cooperative called Swift. This service, owned and used by banks around the world, plays a central role in the circulation of money around the world. If, for example, a Bank of America customer wants to send money to a Barclays customer, Bank of America will send a message via Swift's network to Barclays, informing it of its intention to transfer the money. # 39; money. Swift does not hold the money himself.
As the next wave of US sanctions targets financial messaging, Swift is now under pressure from Washington to disconnect from Iran. But he has not done it yet – and time is running out. These sanctions come into effect after November 4th.
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The Trump administration must now weigh tough choices. It could take a strict approach and impose penalties on Swift or the banks and persons related to the entity. But it could destabilize the big financial institutions that own and rely on Swift. The importance of the courier service is difficult to overestimate. Swift connects more than 11,000 banks in more than 200 countries and no other entity can respond quickly and take its place.
But if Swift is allowed to maintain ties with Iran, the country's leaders could exploit Swift to transfer money into and out of the country. It would also contribute to the European Union's efforts to keep the Iranian nuclear deal afloat.
Here are some of the questions that arise during the fast-paced battle.
What did the Trump administration say about Swift?
Trump's national security advisor, John Bolton, has adopted a hawkish approach to Iran's sanctions. Last month, he said business leaders such as Swift had to ask if doing business in Iran was "worth the risk".
But the Treasury Department actually oversees the imposition of sanctions and has considerable room for maneuver to enforce them. Asked how he could approach Swift, the Treasury declined to specifically comment on any possible sanctions against the courier service. In an e-mail release, the agency added: "Whatever mechanisms a person or entity tries to use to pass deals with a sanctioned Iranian entity, the Treasury has Intended to take action against persons carrying out prohibited transactions. "
Treasury Secretary Steven Mnuchin was scheduled to discuss Iranian and Swift sanctions with European officials at the World Bank and International Monetary Fund meeting in Bali, Indonesia, which will end on Sunday.
Faced with the threat of sanctions, will Swift not decide to disconnect?
Since major European energy companies have broken ties with Iran, saying that they did not want to jeopardize their activities in the United States, Swift could do the same. Either choosing to do business in the country was too risky, perhaps citing the fact that Iranian banks do not sufficiently comply with international regulations and standards. Recall that Swift cut ties with Iran in 2012, when sanctions were imposed on Iran.
But for Swift's leaders, the current situation may not be so simple. In 2012, both the United States and the European Union imposed sanctions on Iran and Swift, as a Belgian entity, had to comply with the measures of the bloc.
Today, the European Union is trying to maintain its trade and financial relations with Iran and is actively trying to thwart the Iranian policies of the United States. Swift may be concerned that his relations with the bloc will deteriorate if he bows to Washington. The European Union is working on its own payment system to support trade with the country.
In a statement, Swift said it was consulting with the US and European Union authorities.
How could the tensions on Swift unfold?
If the Trump administration takes action against Swift, it must do so with caution. Imposing sanctions on Swift would most likely lead banks to stop using this service, which might be enough to prompt Swift to disconnect from Iran.
But the threat of sanctions on Swift could undermine the global financial system. Agencies such as the Treasury generally avoid policies that could undermine the global financial architecture. The Treasury may also obtain information from Swift as part of the Terrorist Financing Monitoring Program. If Swift ceased processing Iranian cash flows, the United States could end up with less information on the inflows and outflows of money.
Richard Goldberg, a senior advisor to the Democracy Defense Foundation, which supports the sanctions against Iran, suggested an alternative to sanctions for Swift. The United States could include members of the Swift board on its sanctions list. According to Goldberg, these sanctions would allow the Trump administration to put pressure on Swift while avoiding much of the uncertainty caused by Swift targeting.
Some sanctions experts said it was important not to focus too much on Swift.
By targeting the Iranian banks, the United States has already done a lot to isolate Iran. Any advantage gained in forcing Swift to withdraw from Iran could be limited and was not worth the potential financial disruption or damage to relations with the European Union, said Katherine Bauer, a member of the United States. Institute for Research on Near East Policy in Washington. "This is not a quick fix," she said.
But Goldberg says that disconnecting Swift would help achieve Trump's goals on Iran. "You can have penalties at seven or ten," he said. "The president wanted a campaign of maximum pressure."
