Writing in the German Handelsblatt newspaper, German Foreign Minister Heiko Maas called for setting up independent payment channels, largely as a way for European businesses to avoid US sanctions targeting any firms—whether inside or outside the US–that do business with Iran.
"As Europeans, we have clearly told the Americans that we consider phasing out the nuclear deal with Iran a mistake," Maas said in an op-ed for Handelsblatt on Wednesday, CNBC reported.
"The first US sanctions are back in force. In this situation, it is of strategic importance that we clearly tell Washington: We want to work together. But we will not let you act over our heads. Therefore, it was right to protect European companies from legal sanctions," Financial Tribune quoted him as saying.
"It is therefore essential that we strengthen European autonomy by setting up payment channels independent of the US, creating a European Monetary Fund and building an independent SWIFT system. The devil is in the thousand details."
Maas stressed that every day that the Iran nuclear agreement continues to exist is better than the highly explosive crisis that otherwise looms in the Middle East.
While the SWIFT system oversees international bank transfers, the creation of a European monetary fund would solidify the bloc's ability to assist countries hit with economic crisis. The creation of independent financial channels would allow it and its businesses to avoid prohibitive sanctions but would likely deepen an ideological schism between the US and Europe that has grown during the tenure of US President Donald Trump.
However, German Chancellor Angela Merkel told reporters Wednesday that while relations with the US had changed, she was not in favor of creating a new payments system.
"We have some problems in our dealings with Iran, no question; on the other hand we know that on questions of terrorist financing, for example, SWIFT is very important," Reuters reported the German leader as saying.
SWIFT Embargo
The news came as Republican lawmakers in the US called for Iran to be expelled from SWIFT, as the Trump administration steadily reimposes sanctions on the country following the US withdrawal from the Iran nuclear deal.
A group of 16 GOP senators led by Ted Cruz of Texas urged Treasury Secretary Stephen Mnuchin on Thursday to take "all necessary steps" to disconnect Iran from the SWIFT network, which allows financial institutions to send and receive information about banking transactions.
"Quick robust enforcement will be critical for the administration's maximum pressure strategy to succeed," they wrote.
"The administration's maximum pressure campaign will not succeed if the Islamic Republic remains connected to SWIFT."
SWIFT is short for the Society for Worldwide Interbank Financial Telecommunications. It is based in Belgium, but its board includes executives from US banks and federal law gives the administration authority to act against Iran's central bank and other banks covered by terrorism and money laundering sanctions.
Breaking With Past
Aside from threats of import tariffs and NATO criticism, Trump's decision in May to withdraw from the 2015 international nuclear agreement was a particular major blow for US-European relations.
Germany had helped France, Britain, Russia, China and the US, under then-president Barack Obama, to broker the deal with Iran and had tried to persuade Trump to remain within the pact.
US sanctions were reimposed on Iran in early August, nevertheless, and the US said any companies doing business with Iranian entities, even those outside the US could be subject to secondary sanctions, much to the chagrin of Europe.
Germany, Britain and France are looking at ways to save the deal and how to prevent their own companies from pulling out of Iran, although a number have already done so, including French oil giant Total and German engineering giant Siemens.
Maas said that while history and a striving for peace had bound Europe and America, "looking back does not lead to the future. It is high time to reevaluate our partnership—not to leave it behind, but to renew and preserve it," he said, noting that "the US and Europe have drifted apart for years".
Later on Wednesday, the German Foreign Ministry backed up the comments by Maas, who is a member of Germany's Social Democratic Party, a junior partner in Merkel's ruling conservative alliance.
The foreign ministry said Maas' comments reflect the German government as a whole and that the article, although based on Maas' opinions, was meant to stir a debate about relations with the US, Reuters reported.
The ministry spokesperson added that "keeping financial channels open is vital to save the Iran deal".
Dollar Dominance
People familiar with SWIFT said that creating a second, European SWIFT without US ties or a dedicated European messaging link to Tehran would not work, as they would remain part of the same group that includes US members.
The issue was not SWIFT but longstanding European frustration with the dollar’s dominance in global finance and the cross-border political power it confers on the United States, they said.
“All this is about the aspiration to have an alternative to dollar payments. SWIFT is both a global standard and a messaging infrastructure, and fragmenting that would defeat the purpose of what SWIFT is about,” said Nicolas Veron, a financial services specialist at Bruegel think tank in Brussels.
EU diplomats said Trump’s America First stance on trade and Iran was fuelling a rethink about EU dependency on the US financial system.
“He is forcing us to explore alternatives … or we can’t carry out our own policies,” a diplomat said.