Thumbing its Nose at SWIFT Ban, Iran Relies on Alternative Methods to Continue its International Banking
Latest update: May 28th, 2012
On Sunday, May 27, 2012, Iran announced that they have successfully bypassed the SWIFT ban, and have an alternative financial network setup.
On March 16, 2012, JewishPress.com described the system that Iran had set up in anticipation of the SWIFT ban in the article below.
Five years ago, the SWIFT clearing system ban on Iranian banks, which goes into effect Saturday, would have yielded satisfactory results. But nowadays Iran is relying on rogue financial systems created by South-American countries, and on its trade with India, China, Russia, Brazil and Turkey, to maintain the flow of money, goods and services for which it continues to pay with oil.
The Belgium-based Society for Worldwide Interbank Financial Telecommunication, or SWIFT, a clearing system used by the world’s major banks, announced Thursday that as of Saturday it will obey the European Union’s ban on blacklisted Iranian financial firms, including some 40 Iranian banks.
The SWIFT ban is an inconvenience
But an article by Otto Reich and Ezequiel Vazquez Ger in the Miami Herald suggests the SWIFT ban will present nothing more than an inconvenience for Iran, because the latter has prepared for just this occasion, utilizing President Mahmoud Ahmadinejad to set up reliable alternative connections for money transfers by Iranian financial institutions.
Essentially, Iran will continue to trade internationally, with the support of ALBA (Alianza Bolivariana para los Pueblos de Nuestra América – Bolivarian Alternative of the Americas) countries: Cuba, Venezuela, Bolivia, Ecuador and Nicaragua.
The ALBA countries have created SUCRE (Sistema Único de Compensación Regional – Unique System of Regional Compensation), which is a virtual currency unit which makes it possible for ALBA members to bypass foreign banks’ supervision.
Ahmadinejad has been preparing for this scenario for years
This system has been used effectively by the belligerent Iran, practically since its inception. Iranian president Mahmoud Ahmadinejad has been a frequent traveler to Venezuela, Nicaragua, Cuba, and Ecuador, making more than half a dozen trips to the region since his election in 2005.
Reich and Vazquez Ger cite confidential bank reports dating back to November 2008, which suggest that the Central Bank of Ecuador authorized the establishment of “a mechanism for deposits and payments to facilitate foreign trade” with Iran. The two authors say that the Central Bank of Ecuador approved in closed sessions a system that would allow the confirmation and payment of letters of credit for foreign trade transactions between it, the Export Development Bank of Iran (EDBI) and the International Development Bank in Caracas, Venezuela (BID).
Both the EBDI and the BID are on the U.S. Treasury’s blacklist of companies doing business with Iran’s military, but the Central Bank of Ecuador chose to ignore this fact when jumping into bed with Iran and Venezuela. Immediately after signing the agreement, the Iranian bank opened up for BID a lavish credit line of $40 million for “importation of Iranian goods and services to Ecuador.”
Reich and Vazquez Ger point out that the fact that Ecuador uses the US dollar as its currency means that once Iranian money gets into the country it is automatically injected into the economy.
But some believe that in the end the ban may work
But a high-placed Israeli financial officer told the Jewish Press Friday that any country that chooses to cooperate with Iran would be blocked sooner or later, as the need for trade with the West inevitably arises. This means that the rate of flow of Iranian money out of Iran will remain limited, despite Iran’s publicized South American rogue connection. “Any country that wants to avoid a direct confrontation with the US would opt out of a cooperation deal with Iran, including even Venezuela. Should the US at some point threaten Venezuela, it, too, would drop Iran like a hot potato.”
India-Iran avoid the dollar for rupees
Another venue for uninterrupted Iranian trade has been cultivated over the past few years with the government of India. Earlier in March the semi-official Mehr news agency reported that Tehran and New Delhi have announced that they are planning to hit $25 billion in annual bilateral trade over the next four years, with payments for Iranian oil made in rupees.
J.E. Dyer, a retired US Naval Intelligence officer who served around the world, afloat and ashore, from 1983 to 2004, told the Jewish Press in an email:
“I have been watching this for a while. India and Iran have arranged to increase trade, including Iranian oil, outside of SWIFT. They are dealing in rupees, but the point for Iran is that she can buy things she needs with her rupees. Long-term value isn’t the issue right now. China and Russia dropped the US dollar as their trading currency a while back, and China in particular has been essentially importing Iranian oil on a barter basis, for goods. No need for SWIFT.
“The Latin American countries have been helping Iran evade US/EU sanctions for a while, and so has Turkey.
The SWIFT ban may backfire by causing economic realignments
“I predicted weeks ago that excluding Iran from SWIFT wouldn’t bring Iran to her knees. Instead, it will give a world in flux new reasons to coalesce differently for power and influence. I don’t think North America and the EU have the economic power now to make Iran holler Uncle! What we can do is force a realignment that has a strong probability of rebounding to our disadvantage.Yori Yanover
About the Author: Yori Yanover has been a working journalist since age 17, before he enlisted and worked for Ba'Machane Nachal. Since then he has worked for Israel Shelanu, the US supplement of Yedioth, JCN18.com, USAJewish.com, Lubavitch News Service, Arutz 7 (as DJ on the high seas), and the Grand Street News. He has published Dancing and Crying, a colorful and intimate portrait of the last two years in the life of the late Lubavitch Rebbe, (in Hebrew), and two fun books in English: The Cabalist's Daughter: A Novel of Practical Messianic Redemption, and How Would God REALLY Vote.
If you don't see your comment after publishing it, refresh the page.
Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.
If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.