Iran Humanitarian Trade Hangs in Balance Over SWIFT Uncertainty

SWIFT chief executive Gottfried Leibbrandt said Friday that the Belgium-based financial messaging service will be disconnecting some Iranian banks at the weekend. 

Earlier in the week SWIFT had stated that it would be suspending some unspecified Iranian banks’ access to its messaging system “in the interest of the stability and integrity of the global financial system” but had not mentioned any links to the reimposition of US sanctions on Monday. 

Hossein Salimi, deputy chief of Money and Capital Markets Commission at Tehran Chamber of Commerce told the Financial Tribune that the SWIFT (the Society for Worldwide Interbank Financial Telecommunications) list of banned Iranian banks could be disclosed either on Saturday or Sunday, local bankers have no idea which banks might be left off the hook, according to Financial Tribune.

As it re-imposed its second round of sanctions on Iran on Monday (the first was in August), the US Treasury added some 700 Iranian individuals and entities to its list of Specially Designated Nationals (SDN) list which included almost all 51 Iranian banks and credit institutions. 

Later however, the treasury removed several banks and credit institutions from both the SDN list and its secondary sanctions without providing any specific reason for its action. 

Among the exempted lenders are Hekmat Iranian Bank, Qarz Al-Hasaneh Mehr Iran Bank and Khavarmianeh Bank (Middle East Bank), of which Salimi is a board member.

"We at the [Middle East] bank do not know why we were removed from the sanctions list…but we have been in full compliance with international banking norms like anti-money laundering rules," Salimi said. 

Lack of Dialogue 

One reason for Salimi's perplexity is that some the banks taken off the SDN list are not a homogenous list and range from a fully private bank like the Middle East to lenders affiliated to state organizations. 

But his bigger sense of consternation comes from the uncertainty about Iran's humanitarian trade in the absence of discourse between Iran and the US. 

"On the one hand Americans say that Iran cannot access SWIFT and on the other they say no 'illegitimate' transactions can be processed through the service by Iranian banks which could apparently mean that SWIFT is not entirely off limits.” 

According to Salimi's information, up until Friday all Iranian lenders still had unhindered access to SWIFT. 

He said while Iranian bank wait for the SWIFT announcement, it is expected that some Iranian banks will be allowed to conduct what the US authorities have said is legitimate business with Iran: food and medicine.

Scarcity of medicine in the wake of sanctions has been a major worry for patients and their families in Iran which has already saw a big price hike after a plummet in rial's value. 

Mahmoud Najafi, Tehran Chamber of Commerce Health Economy Commission President recently expressed concern about lack of banking channels for processing money for medical equipment imposts. According to him and other merchants involved in medical supply imports, the only three banks that had not cuff Iran, namely China's Bank of Kunlun, Turkey's Halkbank and German-domiciled EIH have now stopped working with them.    

President Hassan Rouhani said on Saturday the primary reason behind the US restrictions is to "negatively impact the livelihood" of the people because they target the banking sector and oil exports. 

"It is incorrect to say that sanctions aim to pressure the government and not the people," Rouhani said, adding that the measures will fail to achieve their goals. 

"The US stance is rather misleading and confusing… Nobody still knows how financial transactions for humanitarian needs will play out," Salimi said. 

The senior banker added that progress on the alternative payment channel which the Europeans are working on is also moving at a much slower pace than had been expected. 

The European clearing house, usually referred to as a special purpose vehicle (SPV) is planned to serve as a barter exchange mechanism without using the greenback. 

There are rumors that no European nation is willing to host the SPV, fearing further ramifications from the beleaguered Trump White House. However, sources close to the process told the Guardian newspaper that candidates have come forward and that the system will be housed either in Germany or France.

"Not all Europeans have left Iran and there are some (including two big German firms) that I know that they want to transfer their money from Iran to Europe and they are waiting for the SPV to do so," Salimi said. 

Foreign firms that have not left Iran are the ones that either have minimum US exposure or they are in business not frowned upon by Washington. 

An official with the Central Bank of Iran said that considering the European blocking statute which prohibits European entities from following US sanctions or face retribution from Europe, Iranian banks should seize this legal opportunity to reduce their isolation. 

"Drawing upon the blocking stature, Iranian banks can even press charges against SWIFT or any other entity that refuses to work with them," the official told the Financial Tribune.