Iranian President Hassan Rouhani this week refused to meet with President Trump at the United Nations. One of the big reasons: He and his European backers are waiting to see whether Trump will force the SWIFT financial-messaging service to disconnect Iranian banks in November.
If Trump doesn’t, he probably won’t ever get that meeting. That’s because European attempts to evade US sanctions will be far likelier to succeed, giving Rouhani leverage and putting time on his side.
Iran’s strategy has been telegraphed for months by US and European supporters of the Iran nuclear deal. One week before Trump withdrew from the Joint Comprehensive Plan of Action in May, a pro-Iran deal think tank led by a former senior Obama policy adviser released a report outlining how Europe could evade US sanctions by processing payments to Iran through European central banks. Ten days after Trump’s withdrawal, the European Commission announced it would do exactly that.
On Monday, European leaders announced the plan had been fine-tuned and that payments to Iran could also be processed in a way that made them far less dependent on American dollars. In public, they project confidence in the ability to evade US sanctions. In private, however, they concede the scheme largely depends on SWIFT keeping Iranian banks connected to its system.
Every Iranian bank has a SWIFT code, including the Central Bank of Iran. So long as these banks remain connected to the system, a door to sanctions evasion is always left open. In 2012, Congress decided to close that door and authorized any president to impose financial sanctions on SWIFT’s board of directors if the company refused to disconnect backlisted Iranian banks.
In that pre-Iran deal era, the mere passage of sanctions in the Senate Banking Committee was enough to prompt the EU to order the Brussels-based SWIFT to disconnect Iranian banks. The impact on the Islamic Republic was greater than imagined. The loss of access combined with central-bank oil sanctions brought Iran’s leaders to the negotiating table. This is no time to let up.
Nothing prevents SWIFT from suspending banks from its system based on evidence of illicit conduct — like financing terrorism or proliferation. SWIFT’s corporate rules reserve the right to suspend membership for “conduct which is not in line with generally accepted business conduct principles.”
In that case, the only question is whether SWIFT’s board — comprised of financial institutions that fear US banking sanctions — believes President Trump is willing to enforce the Iran sanctions.
But the administration is sending mixed messages. National Security Adviser John Bolton on Tuesday warned SWIFT that any provider of financial services to Iranian banks would suffer consequences. But the Treasury Department is reportedly reluctant to exert maximum pressure on SWIFT’s board, which includes Citigroup and JPMorgan.
Some former top officials from both the Bush and Obama administrations are advising Treasury to embrace a “compromise” path where SWIFT does not disconnect Iranian banks in November but, instead, strengthens its monitoring of Iran’s illicit transactions going forward. But the president should see that plan for what it is: a dressed-up version of the status quo and exactly what JCPOA supporters want.
In May, the Treasury Department imposed sanctions on the governor of Iran’s central bank, alleging the bank funneled millions of dollars on behalf of Iran’s terror-designated Quds Force “to enrich and support the violent and radical agenda of Hezballah.”
In June, Treasury Under Secretary Sigal Mandelker declared that “we are seeing Central Bank of Iran complicity in Quds Force financing . . . we have seen the Central Bank of Iran’s complicity in supporting the financing of terrorism.”
Over the summer, European authorities foiled an Iranian plot to conduct a terrorist attack in Paris.
President Trump doesn’t need more information to determine whether Iran’s leaders finance illicit activities. He already knows they do. What he needs is maximum pressure to stop them.
Plus, when Treasury reimposes sanctions on Iranian banks in November, as triggered by the US departure from the JCPOA, it’ll do so based on precisely the conduct that should extend to SWIFT sanctions. Treasury will issue warnings to financial institutions around the world: Do business with these designated Iranian banks and you will lose access to the US financial system. Treasury — which has so far performed effectively in many other areas of sanctions enforcement — would risk undermining its own credibility if it established a different standard of compliance for SWIFT.
Last month, 16 US senators wrote to the Trump administration urging maximum enforcement of US sanctions targeting SWIFT if Iranian banks aren’t disconnected in November. They reject any “compromise” in which Iranian banks stay connected to SWIFT. Unless he wants a sanctions policy weaker than his predecessor’s, Trump should too.
Richard Goldberg is a senior adviser at the Foundation for Defense of Democracies. Follow him on Twitter @rich_goldberg. Follow the Foundation for Defense of Democracies on Twitter @FDD. FDD is a Washington-based nonpartisan research institute focusing on national security and foreign policy.