As promised, the latest sanction to hit the Islamic Republic of Iran took effect on Saturday.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has halted service for some two dozen Iranian banks that have been sanctioned by the European Union, including Iran’s central bank. SWIFT is the major means that banks worldwide use for cross-border payments.
The cutoff, effective March 17 at 4 p.m. London time (noon New York time), is a response to EU regulations issued yesterday that ban financial messaging services for entities subject to an EU asset freeze.
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Analysts said Swift’s move will complicate Iran’s ability to make and receive payments, including for its sales of crude oil, which account for more than half of the Iranian government’s revenues, according to the U.S. Energy Information Administration and the International Monetary Fund.“Booting Iranian banks out of Swift will impact oil payments at the margin, but the big impact will be on what Iran buys rather than what it sells,” Trevor Houser, an energy analyst and partner at Rhodium Group, a New York-based economic research firm, said in an interview yesterday.
Houser said Iran probably will “find workarounds for large, strategically important and government-facilitated oil payments. But small Iranian businesses that rely on interbank electronic transfers to pay for everything from food to electronics imports are going to have a hard time buying from abroad.”
Or is Israel’s finance minister right when he says that cutting off Iran from SWIFT could cause its economy to collapse?
If the comments of Iran’s former intelligence minister are any indication, the regime may be taking this latest move very seriously.
Reacting to reports about the Society for Worldwide Interbank Financial Telecommunication (SWIFT) decision to discontinue offering service to the Iranian banks, Ali Fallahian said on Saturday that closing SWIFT to Iran is “like closing international waterways,” Fars News Agency reported.
“If the United States or Europe considers it its right to ignore international laws to meet its own interests, Iran may also decide to respond in kind wherever possible,” he added.
The former intelligence minister also warned Western countries not to underestimate Iran’s ability to close the strategic Strait of Hormuz in reaction to the West’s escalating pressures.
So a question to any international banking and finance experts out there: How crippling a blow is this likely to be to the Iranian economy?