The Most Effective and Crippling Sanction– If and So Far!

A potentially crippling sanction against Iran moved a step closer on Friday when a telecommunications network vital to the global banking industry said it was prepared to expel Iranian banks.

The network, the Belgium-based Society for Worldwide Interbank Financial Telecommunication, known by its acronym Swift, said in a statement on its Web site that it was “ready to implement sanctions against Iranian financial institutions.” The statement said that Swift was monitoring draft European Union regulations covering financial communications providers, and that it “stands ready to act and discontinue its services to sanctioned Iranian financial institutions as soon as it has clarity” on those rules.

Pressure has been building on Swift that would require the network to expel the banks, which already have been penalized in varying degrees of severity by the European Union and the United States under a coordinated sanctions effort. The sanctions are aimed at punishing Iran for proceeding with its disputed uranium enrichment program.

Western powers and Israel have called that program a guise for developing nuclear weapons capability, while Iran has called its program peaceful and has denounced the sanctions as reckless intimidation. But in recent days Iran has called for renewed talks with Western leaders, suspended in mutual frustration more than a year ago, by sending a letter to the European Union’s foreign policy chief, Catherine Ashton, expressing willingness to resume them.

Western powers have expressed wariness and have not issued a formal response, but have not ruled out the possibility that Iran’s intentions are sincere.

Sanctions already applied to Iran’s banks and other companies have disrupted its economy and could sharply reduce its ability to export oil, Iran’s main source of foreign revenue, when the European Union imposes an oil embargo July 1. The sanctions also have impeded the ability of Iran’s central bank to conduct a range of international business.

But if Iran’s central bank and other Iranian banks in the Swift network were expelled, the implications for Iran could be far more drastic, essentially choking off Iran’s entire banking system by denying it the main conduit for exchanging crucial financial transaction information with banks in most countries.

More than 9,000 banking organizations, securities institutions and corporate customers in 209 countries use Swift to exchange millions of standardized financial messages. According to Swift’s 2010 annual report, the most recent available, 19 Iranian banks are members, and the network processed nearly 2.3 million messages for Iranian financial institutions that year, a 7 percent increase from the year earlier.

“A clear multi-lateral legal framework in relation to international financial sanctions against Iran is emerging,” the Swift statement said, referring to the European Union regulations that would apply further restrictions to Iranian financial institutions. The statement said Swift also was “closely following the progress” of a bill under consideration in the United States Senate that has similar intentions.

Swift is overseen both by the National Bank of Belgium and the central banks of the other countries that form the so-called Group of 10: Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States.

There was no immediate comment from Iran on Swift’s announcement. But advocates of Iran sanctions in the United States viewed Swift’s statement as a significant advance.

“Swift appears to have made the right decision to end its relationships with sanctioned Iranian institutions,” United Against Nuclear Iran, a New York-based group that has been pushing for stricter sanctions, said in a statement.

It said Swift’s action “has the potential to significantly isolate the Iranian regime from the world’s markets, and lessen the capital it has to pursue nuclear weapons and fund terrorism. Now is the time for the most robust sanctions in history, and more pressure on the regime than ever before.”

The Swift news came as Secretary of State Hillary Rodham Clinton and Ms. Ashton, meeting in Washington, welcomed Iran’s letter offering to resume talks, and suggested that it could lead to a diplomatic opening. Both, however, stopped short of declaring their readiness to re-engage with Iran.

“I’m cautious and I’m optimistic at the same time for this,” Ms. Ashton said after meeting for more than two hours with Mrs. Clinton at the State Department. In an apparent reference to both diplomacy and sanctions, she said the letter “also demonstrates the importance of the twin track approach.”

Mrs. Clinton called the letter “an important step” but said that the United States and other nations involved in previous negotiations over Iran’s nuclear program continued to consider among themselves if, when and how negotiations might unfold. “We must be assured that if we make a decision to go forward, we see a sustained effort by Iran to come to the table, to work until we have reached an outcome that has Iran coming back into compliance with their international obligations,” Mrs. Clinton said.

Source: New York Times