Swift cuts off Iran central bank in Trump-EU spat
Swift, the organisation that directs the flow of cross-border bank payments worldwide, is disconnecting the Central Bank of Iran from its network after the Trump administration imposed a new round of sanctions on the oil-rich nation earlier this week.
On Thursday, Treasury Secretary Steven Mnuchin tweeted that Swift will be discontinuing service to the Iranian central bank and other institutions. “Swift is making the right decision to protect the integrity of the international financial system,” Mnuchin said on Twitter.
A person with knowledge of Swift’s decision confirmed the move.
The move is part of Swift’s suspension of a number of Iranian commercial banks from the messaging system, which enables companies and individuals to send payments overseas.
It will put pressure on Iranian and foreign businesses that need lenders to facilitate foreign trade, which has surged since the US, Russia, China, France, the UK, and European Union signed a deal with Iran in 2015 to curb the nation’s nuclear-arms ambitions.
The White House withdrew the US from the agreement earlier this year.
Swift, jointly owned by about 10,000 banks and governed by a board representing Citigroup Inc, UBS Group AG, UniCredit SpA, and more than 20 other lenders from around the world, apparently dared not risk the wrath of Washington and lose access to the US financial system.
“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system,” Swift said in a statement earlier this week.
A spokesperson declined to comment further on the issue.
Disconnecting the Iranian banks has ensnared the Society for Worldwide Interbank Financial Telecommunication, as Swift is formally known, in a diplomatic tug-of-war between the US and the EU, which is scrambling to salvage the nuclear accord. In August, the EU brought a new “blocking” law into force that prohibits firms based in the trading bloc from complying with the US sanctions.
Swift, which is based outside of Brussels, may face potential penalties if it is found to have violated that statute. “European companies are re- ally struggling between a rock and hard place,” said Lourdes Catrain, a partner in the Brussels office of Hogan Lovells, the global law firm. “They are subject to the European blocking regulation and they have exposure to US secondary sanctions at the same time.”
For Swift, a non-profit organisation that prefers to remain a quiet cog in the global economy’s infrastructure, the dust-up has thrust it into an awkward and unprecedented position.
In the past, Swift has suspended member banks under the authority of US and EU law; that’s what it did with Iran in 2012, when there was trans-Atlantic unity in forcing the nation to the bargaining table over its nuclear programme.
Now, European leaders are accelerating the development of a so-called special purpose vehicle to open an alternative commercial and payments channel with Iran.
“We regret this decision of the US to take unilateral actions,” European Commission vice president Valdis Dombrovskis told Bloomberg Television earlier this week. “Iran is actually sticking to its side of the deal, so the interna- tional community should stick with it.” Swift is taking heat from not only EU lawmakers, but also European business leaders.
Yesterday, Thilo Brodtmann, the executive director of Germany’s influential engineering lobbying association, VDMA, said Swift had dealt a “harsh blow” to free trade.
“Swift is the lifeblood of international payments,”
Brodtmann said in a statement. “Any restriction, however small, on the neutrality of this system is unacceptable.
Swift, the organisation that directs the flow of cross-border bank payments worldwide, is disconnecting the Central Bank of Iran from its network after the Trump administration imposed a new round of sanctions on the oil-rich nation earlier this week