US Sanctions: SWIFT Network Suspends Several Iran Banks

The SWIFT banking network, the backbone for international monetary transfers, said Monday it has suspended several Iranian banks from its service, after the United States reimposed nuclear sanctions on Tehran.

"In keeping with our mission of supporting the resilience and integrity of the global financial system as a global and neutral service provider, SWIFT is suspending certain Iranian banks' access to the messaging system," it said. 

“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system."

SWIFT, the Belgian-based Society for Worldwide Interbank Financial Telecommunication, provides banks with a secure messenger network to allow international transfers.

Without its services, Iranian banks will find it more difficult to do business with any client prepared to brave US sanctions to maintain ties with Tehran.

Some US sanctions on Iranian banks and oil exports had been suspended after Iran signed a landmark 2105 deal with six world powers to curtail its nuclear ambitions.

But these came back into effect Monday after President Donald Trump pulled out of the accord and demanded that the world again turn up the economic heat on Tehran.

US Secretary of State Mike Pompeo said waivers would be issued to allow eight countries to buy Iranian oil, but that otherwise the measures would be "relentless."

This could mean European and other banks and businesses face secondary sanctions if Washington deems them in breach of sanctions, and US officials have been pressing SWIFT to act.

The network connects 11,000 banks and financial institutions in 200 countries and territories, while priding itself on taking a neutral political stance. 

It does not hold or manage client funds, but allows the banks to transfer funds by sending messages across the network. 

Photo Credit: SWIFT

Iran Sanctions Shadow Falls on Smaller German Banks

Germany's biggest lenders have shied away from business with Iran after past penalties for breaching US sanctions, but smaller banks have leapt on opportunities afforded by the nuclear deal rejected by Donald Trump.

There are just months to go until a November deadline issued by Washington after the US president abandoned a hard-fought agreement that loosened business restrictions on the Islamic Republic in exchange for Tehran giving up its pursuit of nuclear weapons.

But some firms plan to press on in their dealings with Iran despite the looming threat of penalties.

"We will continue to serve our clients," for now, said Patrizia Melfi, a director at the "international competence centre" (KCI) founded by six cooperative savings banks in the small town of Tuttlingen in southwest Germany.

The centre, which supports companies operating in sensitive markets like Iran or Sudan, has seen demand "rising sharply in the last few years, from firms listed on the Dax (Germany's index of blue-chip firms), from all over Germany and from Switzerland," she added.

German exports to Iran have grown since the nuclear deal was signed in 2015, adding 15.5 percent last year to reach almost EUR 2.6 billion (USD 3.0 billion) after 22-percent growth in 2016.

Such figures remain vanishingly small compared with Germany's 111.5 billion euros in exports to the US—its top customer.

Nevertheless, the KCI will "wait and see what the sanctions look like" before turning away from Iran, Melfi said.

Walking on Eggshells

Already, firms dealing with Tehran must take great care not to fall foul of US restrictions.

Transactions are carried out in euros, and the KCI does not deal with businesses that have American citizens or green card resident holders on their boards.

What's more, products sold to Iran cannot contain more than 10 percent of parts manufactured in the US.

One of the most important inputs for the business is "courage among our managers" given the high risks involved, Melfi said.

Germany's two biggest banks, Deutsche Bank and Commerzbank, avoid Iran completely after being slapped with harsh fines in 2015 over their dealings there, with Deutsche alone paying USD 258 million in penalties.

DZ Bank, which operates as a central bank for more than 1,000 local co-op lenders, is withdrawing completely from payment services there, a spokesman told AFP.

That left KCI to seek out the German branch of Iranian state-owned bank Melli in Hamburg.

Even that linkage could break if Iran's biggest business bank appears on a US list of barred businesses as it has before.

Meanwhile, among Germany's roughly 390 Sparkasse savings banks, business with the regime is mostly limited to producing documents linked to export contracts.

"We will be looking even more closely at those" in the future, a person familiar with the trade told AFP.

Elsewhere in the German economy, the European-Iranian Trade Bank (EIH) founded in 1971 is another conduit to Tehran.

Also based in Hamburg, it for now remains "fully available to you with our products and services", the bank assures clients on its website, although "business policy decisions by European banks may result in short term or medium term restrictions on payments".

'Effectively Protected' 

Neither does the Bundesbank (German central bank) believe that much has so far changed for business with Iran.

"Only the European Union's sanctions regime will be decisive", if and when it is changed, the institution told AFP.

Any payment involving an Iranian party would have to be approved by the Bundesbank if things return to their pre-January 2016 state.

German banking lobby group Kreditwirtschaft has called on Berlin and other EU nations to clarify their stance—and to make sure banks and their clients are "effectively protected against possible American sanctions."

KCI's Melfi said time is running out for EU governments to act.

"Many firms just want to stop anything with Iran, since they can't calculate the risk of staying," she noted.

On Friday for the first time since the Iran nuclear deal came into force in 2015, China, Russia, France, Britain and Germany gathered in Vienna—at Iran's request—without the United States, to discuss how to save the agreement.

Photo Credit: DZ Bank