SWIFT: Iranian Sanctions Endanger Global Financial System By Charles Gray

15 February 2012Stop NATOGlobal Times

Nations that do not agree with the US position or sanctions will find this move making it difficult or impossible for their own businesses to effectively deal with Iran.

In effect, if this becomes reality, the economic and foreign policy of nearly every nation on the planet may find itself hijacked by US demands. For many nations, this will appear to be an intolerable infringement upon their sovereignty.

If SWIFT is used against Iran today, there is nothing to prevent it from being used against other nations tomorrow. Certainly, there are those in the US Congress who would not mind striking at Cuba’s or Venezuela’s banking systems via SWIFT.

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A bill recently prepared by the US Senate that intends to force the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to expel Iranian banks and financial institutions from the organization has dramatically expanded already unprecedented moves to isolate the Iranian regime.

While the US hopes that expanded sanctions will force Iran to abandon its suspected nuclear ambitions, the ultimate outcome of this move may be more damaging to the global economic order than the US expects.

The SWIFT network is not a bank, but rather a worldwide network that facilitates monetary transfers and secure communications between banks. A private entity based in Belgium, rather than a government agency, SWIFT is a vital component of the modern financial world. Without it, international purchases and monetary transfers would come shuddering to a halt.

It is this network that the US Congress has targeted, demanding SWIFT cease working with Iranian banks, including the Central Bank of Iran. Coupled with other US sanctions that have targeted financial institutions doing business with Iran, the intent is clear: These sanctions are intended to starve Iran into submission.

However, by blocking Iranian access to SWIFT, the US will drastically widen the scope of these sanctions, not simply in Iran, but all over the world. Nations that do not agree with the US position or sanctions will find this move making it difficult or impossible for their own businesses to effectively deal with Iran.

In effect, if this becomes reality, the economic and foreign policy of nearly every nation on the planet may find itself hijacked by US demands. For many nations, this will appear to be an intolerable infringement upon their sovereignty.

The most important long-term consequence of these sanctions may be the damage done to the international banking system. SWIFT provides a vital service, essentially serving as the circulatory system for international banking and financial systems.

Until now, it has more or less been a neutral system, allowing banks from Cuba to Japan to work together, exchanging secure communications and fund transfers.

Nevertheless, the US move calls the independence and security of the entire SWIFT network into question, and by extension the financial stability of every nation that makes use of it.

If SWIFT is used against Iran today, there is nothing to prevent it from being used against other nations tomorrow. Certainly, there are those in the US Congress who would not mind striking at Cuba’s or Venezuela’s banking systems via SWIFT. This keystone of international commerce could find itself pushed this way and that, as nation after nation attempts to force it to support their own political campaigns and sanctions.

For private companies, the specter of suddenly finding themselves unable to do business or retrieve savings and investments in other nations, should the political wind blow against them, would certainly result in increased financial uncertainty.

The ultimate outcome might be a complete fragmentation of the international financial order, as nations develop their own replacements for SWIFT.

This would make the smooth conduct of international business vastly more difficult and expensive to carry out, and would create yet another drag on an already weak world economy. It would also create a powerful disincentive for businesses or banks to take part in multi-national financial ventures, drastically reducing the capital available for investment or development.

This unilateral decision by the US creates a dangerous precedent, not simply for Iran, but for any nation that depends on international commerce. Ironically, it is the US that potentially has the most to lose from the fragmentation of the SWIFT network, which makes this move by Congress all the more foolish. Yet US politicians continue to push the idea, oblivious to the threat their actions are posing, not simply to Iran, but to the entire world.

While the US may be concerned about Iran’s suspected nuclear program, attempting to stop it by making use of sanctions that will so drastically harm the global economy is not the way to do it.

This measure should be rejected by US President Barack Obama. If not, then the US should be prepared to accept the responsibility for the consequences of its actions. It would be ironic indeed, if the actions of a nation known for its advocacy of free trade end up striking at the root of that very trade.

The author is a freelance writer based in Corona, California.

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