After the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in May, the European Union is attempting to keep the agreement in place with Iran. However, the reach of the U.S. financial system can be difficult to overcome. As a result, there appears to be an effort by Europe to undermine those sanctions, giving them access to Iranian oil even after sanctions take effect.
During briefings in Washington, German officials indicated that they have the goal of keeping Iran connected to the SWIFT system (Society for Worldwide Interbank Financial Telecommunication) used for global financial transactions. If Iran remains connected, it gives Europe the ability to pay for Iranian oil and receive payments for their exports, essentially creating a workaround U.S. sanctions.
Any high pressure attempts to cut off Iran financially cannot occur if Iran remains attached to the SWIFT system.
Europe Encourages to Explore Options
The European Commission is encouraging members of the European Union to explore the option of directly paying the Central Bank of Iran and access to SWIFT could make this possible. If such a transaction occurred, then the U.S. could designate that country’s bank as a violator of sanctions and block it from using dollars and isolating that country from the international financial system.
It appears to be a game of chicken, where the German government is betting that the U.S. would not take the economic risk of blocking a country’s central bank.
American alternatives include designating the officials of the offending bank as sanction violators and other U.S. law-enforcement and regulatory bodies could take action against the offending country’s central bank.
Solution is Removal from SWIFT
The U.S. Treasury Department has given SWIFT until November 4 to disconnect Iran’s central bank and other financial institutions currently under sanction. Corporate rules for SWIFT prohibit its users from engaging in conduct not in line with generally accepted business conduct principles. Flagrant examples of Iran doing so include financing the Assad regime, subsidizing terrorism, building ballistic missiles, and human rights violations.
For SWIFT, not complying could have serious consequences for those who are part of its board and those who handle its day-to-day operations. Allowing Iran to remain connected could mean being held personally responsible for aiding and abetting the evasion of sanctions.
There are ripple effects from this rock being thrown by Germany, but there appears little that can be done to stop Trump and his determination to strangle the Iranian economy.