Economy, Business And Markets

Europe Trying to Exempt Swift From Iran Sanctions

Europe Trying to Exempt Swift From Iran Sanctions
Europe Trying to Exempt Swift From Iran Sanctions

As the reimpostion of the second round of US sanctions draw near, European finance ministers will try to persuade the Trump administration not to cut off Iran’s access to Swift, the global financial messaging service, in meetings with Steven Mnuchin, the US treasury secretary, at the IMF gathering in Bali this week. 

“Our ask is: why bother ripping out all of the electrical cables from a building if you can switch off a light,” a European diplomat who confirmed the planned meetings has told the London's Financial Times. “If you can designate a bank [for sanctions] then there’s no need to force Swift to disconnect from Iran.” The disagreement over Swift was heading for “a diplomatic train wreck”, according to another person familiar with the matter. 

European officials who met US officials last month to ask for leniency have so far drawn a blank. “We did a démarche to the administration, but it was a complete blockage; they didn’t listen to our argument,” said a second European official.

Internal Battle 

This is while an internal battle is being fought inside the Trump administration to save Iran's access to international financial markets, providing Tehran with a critical lifeline ahead of the implementation of harsh new economic sanctions, according to multiple US officials who spoke to the Washington Free Beacon.

Top officials in the Trump administration's treasury department—including some who hope to save the landmark nuclear agreement—are said to be pushing for Iran to remain connected to the Swift banking system, an international system that facilitates cross-border transactions.

Swift leaders were in Washington last week holding meetings with Trump administration officials to ensure that Iran retains its access to the international banking system, which has helped keep the Iranian economy afloat as European allies seek to continue doing business with the Islamic Republic, according to US officials familiar with the situation.

While President Trump and top White House national security officials such as John Bolton have made clear that Swift and European allies must end their business dealings with Iran, a cadre of treasury department officials are said to be standing firm against this effort, paving the way for an internal showdown ahead of the Nov. 4 deadline for new sanctions, sources said.

"President Trump instructed the administration to restore all of the sanctions from the Obama era and then some, because that's what maximum pressure means," said one US official who works extensively on Iran policy.

"During the Obama era, Swift disconnected Iran due to sanctions threats," said the source, who was not authorized to speak on record about the sensitive situation. "There are people inside the administration who think they can convince the president to be weaker on Iran than Obama was. That's a bold strategy. Let's see if it pays off for them."

Some details of this internal battle were first reported by the Washington Post ahead of the European visit. The Post identified treasury secretary, Steve Mnuchin, as the treasury official leading the battle to save Iran.

Congressional leaders are said to be aware of this effort to save Iran's access to Swift and are pushing back with force.

Sens. Ted Cruz (R., Texas) and Tom Cotton (R., Ark.), both vocal anti-Iran leaders, told the Free Beacon through spokesmen that Congress will not go along with efforts to protect Iran's financial access, despite pressure from some inside the Trump administration

"Ultimately, Swift and the Europeans must choose between doing business with the United States or Iran," a Cotton spokesman told the Free Beacon. "Those attempting to use a creative backchannel to facilitate commerce with Iran would do well to remember that the $19 trillion US economy dwarfs Iran's, which is approximately the size of Maryland's."

Cruz and other allies in the senate have repeatedly warned European allies and Swift leaders—which includes US-based banks JPMorgan and Citibank—that Congress will not hesitate to sanction any institution or government that breaches the new US sanctions.

A showdown on Swift is now likely, particularly as Iran pursues a greater number of economic partnerships across the globe.

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