PM calls for more measures; banking sanctions on Iran begin

Steinitz: Sanctions barring Iran from int'l fund transfer system make receiving money for big oil transactions impossible.

By
March 19, 2012 01:05
Iranian handles money at bazaar

Iranian handles money at bazaar 370. (photo credit: REUTERS)

 
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A day after the Brussels-based SWIFT global payment system cut off major Iranian banks, Prime Minister Binyamin Netanyahu – while welcoming the move – told cabinet ministers on Sunday that still tougher measures were needed.

Calling the move “positive,” Netanyahu curbed his enthusiasm by saying that only time would tell how effective it would be.

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SWIFT is the world’s largest electronic payment system and on Saturday it implemented its decision to cut off 30 Iranian banks blacklisted by EU-supported economic sanctions.

Among the banks affected by the move are those believed to be financing Iran’s nuclear activity or terrorism – Mellat, Post, Saderat and Sepah.

Netanyahu has been lobbying in favor of this move for months, as well as for an EU embargo on Iranian oil that will go into effect in July. He did not spell out what tougher measures he thought still needed to be enacted.

In recent days the prime minister has said that Iran’s decision to once again sit down for talks with the P5+1 – the five permanent members of the Security Council plus Germany – is an indication that Tehran is concerned about the strict measures that have recently been enacted. Yet he said there was still no evidence that the Iranians were abandoning their nuclear program – and stopping their program, he believes, is the litmus test for the effectiveness of the sanctions.

Channel 2 reported on Sunday night that Turkish Prime Minister Recep Tayyip Erdogan will meet with Iran’s supreme leader, Ayatollah Ali Khamenei, in Iran in 10 days to try to get him to back down from both the nuclear program as well as support for Syrian President Bashar Assad.



Before meeting Khamenei, Erdogan is scheduled to meet with US President Barack Obama at the Seoul Nuclear Security Summit from March 27 to 29.

Netanyahu also told cabinet ministers that Iran was behind the challenges Israel was facing today from the Gaza Strip. The terrorist groups there, he said, would not have the same power to threaten Israel were it not for Iranian support. If you took Tehran out of the equation, the terrorist groups’ ability to harm Israel would be greatly diminished since it was Iran that provided those organizations with weapons, missiles, money and logistical support, he said.

Finance Minister Yuval Steinitz, meanwhile, termed the SWIFT move a “hard blow to the Iranian economy,” saying it would make it very difficult for Iran to both import and export goods.

“This will make it very difficult for their oil transactions and they will only be able to trade in cash or gold,” he said.

“And this is impossible when you are talking about sums in the billions. Therefore, this is a dramatic step that is liable to bring about the collapse of Iran’s economy.”

But, like Netanyahu, Steinitz said he did not know whether this would be enough to get the Iranians to abandon their nuclear ambitions.

Even as the SWIFT decision was implemented, Tehran took urgent steps to withstand the pressure.

Reuters shipping data showed that vessels carrying at least 360,000 tons of grain were lined up to unload in Iran, a sign that Tehran was stockpiling huge amounts of food to blunt the affect of tougher Western sanctions. It had even begun buying wheat from its arch-enemy, the United States.

“There is no doubt in my mind it is geopolitical hedging,” Rabobank commodities analyst Nick Higgins said.

“They are trying to get as much as they can in the country to blunt the effect of any further escalation in international sanctions.”

The sanctions regime exempts food.

Some overseas Iranian businessmen said the SWIFT move could strangle their operations.

“This is like our lifeline to the outside being cut,” said Naser Shaker, who owns an oil and gas trading company in Dubai. “All the transactions will be stopped. Through the banks there are no more options.”

Morteza Masoumzadeh, a member of the executive committee of the Iranian Business Council in Dubai and managing director of the Jumbo Line Shipping Agency, said it was “devastating news.”

“If Iranian banks cannot exchange payments with banks around the world, then this will cause the collapse of many banking relations and many businesses,” he said.

The Obama administration applauded SWIFT’s move and said it reflected a consensus in the international community that “substantially increased pressure” was needed to convince the Iranian government to address concerns about its nuclear program.

But US lawmakers pushing for tougher sanctions on Iran said SWIFT needed to eradicate all Iranian financial institutions from its network, not just those blacklisted by the West.

“The impact of financial sanctions will not come close to full potential if Iran can simply go across the street to a non-designated bank to conduct the transactions with those still willing to do business with it,” said Rep. Brad Sherman, a Democrat from California, who is working with Republican Sen. Mark Kirk of Illinois on legislation that would extend sanctions to all Iranian banks.

Since late last year, Iran has largely been frozen out of the global banking system. Washington has used anti-moneylaundering legislation to make it risky for banks around the world to do business with Tehran, including trade financing.

Iranian businessmen have continued to conduct some trade with Dubai and other places, however, by transferring funds through money exchange houses. But over the past few weeks, many of those houses have stopped doing Iranian rial business as well.

Mohamed al-Ansari, chairman and managing director of Al Ansari Exchange, one of the United Arab Emirates’ top two exchange houses, said the weakness of the rial, which saw its black market rate roughly halve against the dollar in the year to January, had made it too risky to handle the currency.

“Most exchange companies have stopped dealing in the Iranian rial mainly because of its devaluation in the last few months, as well as the regulations imposed by the US regulatory authorities on the financial sector,” he said.

Reuters contributed to this report.

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