Swift action taken to pressure Iran

BELGIUM: Dozens of Iranian banks were blocked from doing business with much of the world as the West tightens the financial screws on a nation it wants to prevent from developing nuclear weapons.

The Belgium firm that facilitates most international bank transfers yesterday took the unprecedented step of blocking 30 Iranian banks from using its service. The move is likely to hurt Iran’s all-important oil industry and make it difficult for citizens to receive money from relatives living abroad. The move by the Society for Worldwide Interbank Financial Telecommunication (Swift) is part of a broader effort by Western nations to isolate Iran financially and force it to demonstrate that it is not trying to develop nuclear weapons.

Iran says that its nuclear programme is for peaceful purposes only, but officials in many other countries believe otherwise.

Swift said it was forced by recent European Union sanctions to discontinue service to the Iranian banks beginning tomorrow.

Swift is a secure private network used by nearly every bank worldwide to send payment messages that lead to the transfer of money across international borders.

Swift’s chief executive Lazaro Campos described the move as ‘‘extraordinary and unprecedented’’.

‘‘It is a direct result of international and multilateral action to intensify financial sanctions against Iran,’’ he said.

No immediate reaction from Iran’s government or the banks involved. Not all Iranian banks are subject to EU sanctions, and oil experts say there will be ways for Iran to sell oil without using Swift.

Still, blocking Iranian banks’ access to Swift is ‘‘tightening the noose’’ on Iran, said Ali Ansari, an expert on the Middle East at the London-based Chatham House think tank.

Sanctions long in place have failed to convince Iran to return to nuclear talks; the EU, which imports about 14 per cent of Iran’s oil, plans to institute an embargo on Iranian oil in July.

The regime has been able to withstand these sanctions in part because high global oil prices have provided Iran, the world’s third largest exporter, with record oil revenues.

Iran exports 3.5 million barrels of oil per day, about 4 per cent of the world’s oil use.

Last year, Iran generated US$100 billion (NZ$122B) in revenue from oil, up from $20b a decade ago, consulting firm IHS CERA says.

Iran is expected to continue to sell to India, China and other big oil users that are not participating in the EU embargo.

But by forcing Swift to expel Iran, Western nations are trying to make it more difficult for Iran to sell oil even to willing customers. A single oil tanker can hold US$100M worth of oil, making electronic bank transfers crucial.

Analysts expect Iran to try to skirt the sanctions in a few ways. It may exchange oil for cash, gold or other commodities directly.

It may try to mingle its oil with oil from other countries in international terminals and pipelines to mask its origins. It could get help from the central banks of countries friendly to Iran.

‘‘Throughout the history of the oil trade, someone always gets around trade embargoes one way or another,’’ said Jim Ritterbusch, a veteran oil trader and analyst.

Also, Iranian banks that have not been sanctioned by the EU could sell oil.

Analysts say by reducing the number of customers for Iranian oil, and making it more difficult to pay, Iran will be forced to accept a lower price for its oil and likely be unable to sell all that it hopes to.