Risky Business: European Leaders Developing Alternative Banking System To Help Iran Evade U.S. Sanctions

SWIFT, The Backbone Of Global Banking, Must Be Protected & Should Disconnect Iran From Its System

Since 1973, nearly all international bank transfers have been facilitated by a Brussels-based organization, Society for Worldwide Interbank Financial Telecommunication (SWIFT), which today connects more than 11,000 banks and other financial institutions and handles 30 million transaction messages every day.

Unfortunately, due to differences between the U.S. and Europe on the re-imposition of sanctions against Iran, officials in Germany and France are hard at work to create a parallel system, one that excludes U.S. banks. Their goal is to support European banks searching for a way to continue processing transactions with their Iranian counterparts after the U.S. re-imposes sanctions in November.

“With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions,” said French Minister of Finance Bruno Le Maire. “That means having totally independent financing instruments that do not today exist.”

If the European project is successful, it would severely undermine the bite of sanctions against the Iranian regime. During Iran’s previous disconnection from SWIFT from March 2012 until February 2016, the ayatollah’s economy suffered tremendously. In the energy sector alone, Iranian oil export revenue dropped from $95 billion in 2011 to $69 billion after losing access to SWIFT – their lowest levels since 1986. Soon thereafter, the economic downturn helped bring Iran to the negotiating table.

The European plan amounts to a sanctions evasion technique. Arranging an alternative for SWIFT would aid the regime, undermine the integrity of the global financial system, and help line the pockets of the IRGC and Iran’s terror proxies. It would be a terrible, short-sighted tactical mistake.

European banks have a history of conducting business with Iran that undermines diplomatic efforts designed to change the regime’s behavior. Many of the largest banks – including BNP Paribas, Credit Suisse, ING and Commerzbank – have been fined for sanctions-related violations by the U.S. Office of Foreign Assets Control (OFAC). Since 2003, banks on the continent have paid more than $3.45 billion in fines for violations of U.S. sanctions against Iran.

There is a seemingly unending appetite in Europe to placate the regime in Tehran. Arranging an alternative to SWIFT would be to Iran’s benefit and Europe’s detriment. Creating a mechanism to help the ayatollah evade U.S. sanctions would severely undermine one of the most important and effective tools compelling the Iranians to abandon their nuclear ambitions. Economic diplomacy works, and Europeans should stop their grandstanding and get on board.

An alternative to SWIFT would also be highly unlikely to benefit the European economy. The continent’s largest businesses have determined that assuming maximum risk for minimal profits is a poor business strategy and they’ve left Iran behind.

In the meantime, SWIFT remains the international standard by which global banking functions. UANI has been in touch with senior officials representing banks who have a seat on the SWIFT Board of Directors, including the European banks that have been fined by OFAC for violating U.S. sanctions against Iran, to urge Iran’s immediate cutoff from the SWIFT system.

The members of SWIFT should join UANI in urging the board of directors to immediately terminate SWIFT’s relationship with all Iranian banks and financial institutions connected to its network, including the Central Bank of Iran (CBI). The CBI has undermined the international financial system and until recently was led by a specially designated global terrorist. Cutting off Iran is the best way to protect SWIFT and support the existing banking system.

David Ibsen is the President and CEO of UANI. Follow him on Twitter @dlibsen.