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SWIFT financial service cuts Iran off

Published time: March 15, 2012 14:37
Edited time: March 16, 2012 15:09

Branch of Iranian owned Bank Sepah International in London (Reuters / Luke MacGregor)

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SWIFT, the Brussels based clearing house, announced it will cut services to Iranian banks on foot of European sanctions, in order to comply with the EU Council. The service denial includes Iran’s central bank, which processes Iran’s oil revenues.

­Some 30 Iranian banks will be blocked from doing international business.

The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is crucial to Iran’s oil and other trade.

The EU Council decision prohibits companies such as SWIFT from continuing to provide specialized financial messaging services to EU-sanctioned Iranian banks. They, alongside the SWIFT customer community have been notified of the disconnection, which will become effective on Saturday 17 March at 16.00 GMT.

A statement on the SWIFT website said “Disconnecting banks is an extraordinary and unprecedented step for SWIFT. It is a direct result of international and multilateral action to intensify financial sanctions against Iran.”

The EU Council has already imposed asset freezes and other restrictions on a number of people and organizations associated with Iran's nuclear activities. Iran’s ban from SWIFT ups the pressure aiming to persuade Iran to drop its nuclear program.

The move may also buy time for the US to dissuade Israel from launching a pre-emptive military strike on the Islamic Republic.

Some believe the plan might actually backfire. It could send oil prices soaring and undermine SWIFT’s reputation. The Brussels-based organization is a banking hub used by virtually every nation and corporation around the world – but it is also forced to abide by EU Council decisions.

­SWIFT sanctions ‘will not work’

­Paolo Raffone, a crisis management specialist, believes the sanctions will have little effect on Iran.

I think they will not work for the simple reason that the SWIFT system is mostly used in European and Transatlantic transactions,” he told RT. “And as we know from the news, Iran is already making agreements with India and China to have exchanges in other currencies and through other systems. So what will not be sold to Europe will be sold elsewhere.”

He said the sanctions are intended to push Iran to the negotiating table with the United States.

"These sanctions probably want to press Iran to align itself and find a single voice to talk in these negotiations,” he marked.

Raffone noted that future sanctions will probably prove fruitless as Brazil, Russia, India and China would most likely not take part in them.

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