BRUSSELS, Feb 9, (Agen-cies): The organisation that facilitates the bulk of the world’s cross-border payments is facing growing US pressure to do what it has never done before — cut a country off from its global messaging system.
Belgium-based SWIFT — the Society for Worldwide Interbank Financial Telec-ommunication — is vital to international money flows, exchanging an average 18 million payment messages per day between banks and other financial institutions in 210 countries.
The member-owned cooperative has been described as the ‘glue’ of the global banking system with the value of daily payments using SWIFT estimated at more than $6 trillion.
You would struggle to find any bank or financial institution not connected to SWIFT. Non-financial users include General Electric, Google, Microsoft, Danone, Daimler and Sony.
The United States is seeking tougher scrutiny of banking transactions and oil shipment financing with Iran, which it accuses of seeking to develop nuclear weapons.
A US Senate Bill, if it becomes law, would direct the White House to press SWIFT to drop Iranian banks, and would give the Treasury Department the power to sanction SWIFT and the banks that own it.
Nineteen banks and 25 connected institutions from Iran sent and received some 2 million messages in 2010. They included banks the US accuses of financing Iran’s nuclear programme or terrorism — Mellat, Post, Saderat and Sepah.
Faced with outside pressure, SWIFT’s typical response has been: don’t shoot the messenger. The Belgium-based body, involved in 80 to 90 percent of all global payments, is keen to point out that it does not carry out transactions and is only a messaging system, more akin to a telephone service, which US lawmakers are not targeting. SWIFT does not hold accounts for members and does not perform clearing or settlement.
“We are not a bank and do not hold funds. Our member banks are responsible for the content of these messages and complying with applicable financial sanctions; they are not monitored or controlled by SWIFT,” the cooperative said in an email exchange.
However, it said last week that it was working with US and EU authorities to resolve the issue.
“This is a complex situation,” it said, adding the impact on the global financial payments system and the flow of humanitarian aid to Iran required careful thought.
SWIFT has faced tests of its independence before.
After the United States and European Union had imposed sanctions on Myanmar in the 1990s over its human rights record, SWIFT faced NGO pressure to shut out the country’s banks.
SWIFT’s response then as it is now was that it is just a common carrier.
Subpoenas
“At SWIFT I didn’t make the law. We just followed the law,” said Leonard Schrank, who was chief executive from 1992 to 2007.
Over the years, SWIFT has faced various subpoenas to release information, but typically resisted, convincing investigators to target the responsible banks instead.
That changed after the Sept 11 attacks in 2001.
“Within days I got a call from the Treasury,” said Schrank.
Within weeks, SWIFT set up an automated programme allowing US investigators to track the payments of suspected terrorists. Few people knew of the Terrorist Finance Tracking Program as it was subsequently called, until 2006 when The New York Times revealed its existence. It led to a wave of criticism from Europe about invasion of personal privacy.
Europe is starting to pay attention this time too. No formal talks have begun, but EU governments have begun informal discussions on whether to include SWIFT in its own package of sanctions against Iran. Some are privately concerned that Washington could go as far as threatening SWIFT itself if it does not shut out Iran.
“We are forced to look at it when Congress does because of the consequences,” said one senior EU diplomat, speaking on condition of anonymity.
Some of those pushing for tougher measures against Iran point out that SWIFT’s rules allow it to expel users if they harm or threaten to harm the organisation’s reputation. It therefore has the power to act, they reason.
The counter argument is that if SWIFT gives ground over Iran, it may well face calls to shut out other countries. China, for example, might want Taiwan excluded.
SWIFT, a cooperative of more than 10,000 users and with a board including executives from Citi, UBS and Deutsche Bank, says it is aware of the gravity of the situation around Iran.
“SWIFT is clearly concerned about setting a precedent here, but we’re looking at a Mideast war or worse. Hopefully they will find a solution, some way of ensuring this is just a one-off,” said Schrank. “Otherwise, SWIFT could get endlessly caught up in financial disputes as well.”
Catastrophic
Israel’s mounting speculation that Iran is moving closer to developing a nuclear weapon could have “catastrophic consequences”, a senior Russian foreign ministry official warned Thursday.
“The inventions” concerning Iran’s nuclear programme “are increasing the tension and could encourage moves towards a military solution with catastrophic consequences,” Mikhail Ulyanov told the Interfax news agency.
Speculation has risen in recent weeks, driven in part by comments made by Israeli officials, that the Jewish state may soon launch a military strike on Iran’s nuclear facilities to slow or halt its controversial programme.
Israel and much of the international community believe that Iran’s nuclear enrichment programme masks a covert weapons drive, a charge Tehran denies.
The “noise” about Iran’s nuclear intentions “has political and propaganda objectives which are far from being inoffensive,” said Ulyanov, head of the security and disarmament department in Russia’s foreign affairs ministry.
Israeli Defence Minister Ehud Barak said last month that any decision by Israel on whether to attack Iran in a bid to halt its nuclear programme remained “very far away.”
However Israel’s chief of military intelligence, General Aviv Kochavi, told a security conference last week that Iran had enough radioactive material to produce four nuclear bombs.
And an expert on Israeli intelligence, Ronen Bergman, wrote in the New York Times last month that an Israeli attack could come this year.
But Ulyanov said: “In our evaluations we prefer to be based on the actual facts, which are that Iran’s nuclear activity is under strict monitoring by the International Atomic Energy Agency (IAEA).”
Reputation
French President Nicolas Sarkozy put his reputation as a stalwart friend of Israel on the line Wednesday, warning that military action was no way to deal with nuclear-minded Iran at a dinner hosted by France’s main Jewish group — and his likely presidential election rival in the audience.
In the wake of new US concerns that Israel might strike Iran’s nuclear facilities this spring, Sarkozy reiterated his ironclad commitment to Israel’s security but emphasized “the solution is never military.”
“The solution is political, the solution is diplomatic, the solution is in sanctions,” Sarkozy said, referring to a string of UN sanctions over Iran’s nuclear program, which the West fears mask designs to build weapons.
“We want the leaders of this country to understand that they have crossed a red line, and to reassure Israeli leaders so that the irreparable is not carried out,” Sarkozy said of possible military action.
Tehran, whose Islamist leaders have called for Israel’s destruction, insists its nuclear program is peaceful and aimed at generating electricity and civilian-sector projects.
Sarkozy said Israel needs a peaceful Palestinian state as its neighbor, and pointed to France’s historic rivalry with Germany — turned into a crucial European alliance today — as a possible model for Palestinians and Israelis.
“France says: ‘Israeli people — perhaps more than another people — you can understand the need for the Palestinians to hope,’” said Sarkozy, adding that he wanted to see Israel one day “be loved, and not just feared.”
Sarkozy said Israeli Prime Minister Benjamin Netanyahu, with whom he has had a fraught relationship at times, was known for “firmness ... someone who is firm must be open, because he doesn’t have to prove his firmness, and his strength.”
The French leader also defended his decision to support Palestine’s membership in Paris-based UNESCO, the UN’s cultural arm, acknowledging that some in the crowd Wednesday were troubled by that.
“If I did it, it’s exactly because my entire history has been to be close to Israel,” he said.
Sarkozy’s comments came amid high-stakes French political drama as France’s best-known Jewish organization, CRIF, hosted the president and his most likely challenger in this spring’s election: Socialist Francois Hollande.
The dinner that has become a must on France’s political calendar in recent years offered a rare glimpse of the two longtime rivals together in public and in a social setting with their often-testy political families.
Hollande didn’t miss the chance to make his presence known even if the president got to make an address — and he did not. After Sarkozy’s speech, he got up from his table, crossed the ballroom and greeted the president — shaking hands with him and others at a vast table reserved for the Cabinet.
They men bantered and joked as journalists’ cameras flashed.