Tuesday, February 14, 2012

Cutting Off Iran from SWIFT

The Obama administration wants Iran evicted from SWIFT, an independent financial clearinghouse that is crucial to the country's overseas oil sales. That would leapfrog the current slow-pressure campaign of sanctions aimed at persuading Iran to drop what the U.S. and its allies contend is a drive toward developing and building nuclear weapons.
More than 40 Iranian banks and institutions use SWIFT to process financial transactions, and losing access to that flow of international funds could badly damage the Islamic republic's economy. It would also probably hurt average Iranians more than the welter of existing banking sanctions already in place since prices for household goods would rise while the value of Iranian currency would drop.
SWIFT handles cross-border payments for more than 10,000 financial institutions and corporations in 210 countries. It lets users exchange financial information securely and reliably, thereby lowering costs and reducing risk. It operates on trust and neutrality - SWIFT accepts nearly all comers and does not judge the merits of the transactions passing through its secure message system.

Established in 1973, the essential but little-known hub is overseen by major central banks, including the U.S. Federal Reserve and the European Central Bank.(1)

The root problem in implementing these punitive measures is that Iran has an actual product to sell. It's economy is not based on residual financial power and the swapping and leveraging of pieces of electronic paper and credit. If a country has a valuable commodity to sell, it will find takers one way or another. Direct barter or exchange between nations through their respective central banks, for instance. Or utilizing a third party (Russia) with large dollar reserves.

1'US, Europe look at fast but risky penalty on Iran ' - AP

All the end result of the sanction on Iran is too expose the limitations of European and American imperial power. They can no longer completely control the game.

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