Swift cuts off Iran cen­tral bank in Trump-EU spat

Gulf Times Business - - FRONT PAGE -

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

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