Diplomacy: Blocking banks before bombing

Wallace, head of United Against Nuclear Iran, praises this week’s SWIFT action but says it did not go far enough.

A general view of the Bushehr main nuclear reactor 311 R (photo credit: Reuters/ Raheb Homavandi)
A general view of the Bushehr main nuclear reactor 311 R
(photo credit: Reuters/ Raheb Homavandi)
Before you "consider bombing the hell out of a country," you should "first at least be willing to enact and measure the impact of the most robust sanctions in history."
That, at least, is the view of Mark Wallace, the US representative for UN management and reform under the Bush administration and now the head of a New York-based organization called United Against Nuclear Iran (UANI), a non-partisan advocacy group lobbying hard for economic sanctions against Iran.
The sanctions-first policy is both morally and tactically the right way to go, Wallace said in a telephone interview.
“On a moral basis, we should be prepared, if debating a military option, to first enact truly the most robust sanctions on Iran,” he said.
And from a tactical perspective, such sanctions may convince the Iranians that all that talk about a military option being “on the table” is real.
Harsh economic sanctions will show the Iranians the West’s “seriousness of purpose,” he said. In other words, why should the Iranians ever believe the West would take military action if it is unable to even take robust economic action? But a willingness to impose crippling sanctions will send a message about a readiness, if necessary, to use military force.
For that reason, Wallace – who formed his organization in 2008 with late US ambassador Richard Holbrooke, former CIA director Jim Woolsey and former White House Middle East expert Dennis Ross – said the move this week by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to cut off a number of Iranian banks out of its system was significant.
Significant, but not enough because the move cut off some – but not all – Iranian banks out of the structure through which the financial world conducts its business. Anyone who has ever wired money anywhere has used the Brussels-based SWIFT system.
At the end of January, Wallace wrote to Yawar Shah, the chairman of SWIFT’s board of directors, and urged him to take action against Iran.
“No financial institution in Iran would be able to process funds transfers in any EU country without access to SWIFT. It is the means of communication on which the financial world wholly depends for certainty of transaction,” he wrote.
Indeed, according to SWIFT’s own annual review, in 2010 Iran’s 19 SWIFT member banks and 25 connected institutions had sent 1.160 million messages and received 1.105 messages through the system. That is a lot of transferred funds.
“Unfortunately, the global SWIFT system is used by Iran to finance its nuclear weapons program, to finance terrorist activities and to provide the financial support necessary to brutally repress its own people,” Wallace wrote.
He added that without access to SWIFT, Iran would be impeded in financing those activities.
Impeded, but not completely shut down. One of the problems, Wallace said, is that not all the Iranian financial institutions were cut out of the SWIFT system and until they are, Iranian banks still in the system will carry out transactions.
If implemented correctly, the SWIFT measure could be a “silver bullet.” But, he said, “implemented correctly” means that all the banks should be sanctioned.
There are currently three levels of sanctions against Iran. The lowest level is the sanctions agreed upon by the UN Security Council and the toughest are measures taken by the US government.
In between the two are the EU steps.
What that means regarding SWIFT, Wallace said, was that a few of the banks sanctioned by the US were not on the EU list. And since they were not on the EU list, the Brussels-based SWIFT system did not cut them off.
SWIFT had a couple of choices and decided to follow the more narrow EU sanctions, Wallace said, adding that SWIFT should be compelled to go by the stricter US guidelines.
Wallace said that what is needed but has yet to be implemented is a complete banking blockade on Iran whereby “all Iranian financial institutions must be cut off by the international banking system and whereby communications are denied to all Iranian financial institutions.”
Otherwise, he said, comparing it to a US arcade game call Whac-a-Mole, what you have is a situation where each time you knock one bank out of the international system, another one will just come and take its place.
In addition to banks in Iran still able to operate inside the international system, Wallace said there are concerns about Lebanese banks doing Iran’s bidding, as well as a system whereby if an Asian country purchases Iranian oil, it could pay for it into an Iranian account outside of Iran, with the money used to buy goods and service then brought into the country.
“We think this is a significant first step, but more needs to be done,” Wallace said of this week’s SWIFT action.
Even Prime Minister Binyamin Netanyahu agrees.
Netanyahu raised the SWIFT move in talks he held earlier this month in Ottawa and Washington, and praised it as “positive” at Sunday’s cabinet meeting.
The SWIFT move, coupled with the decision by the EU to ban Iranian oil imports starting on July 1, were the types of “crippling” sanctions Netanyahu has been talking about, and lobbying for, over a period of months, even years.
Netanyahu hedged his enthusiasm, however, by saying that more still needed to be done. He has not publicly given any details of what exactly he has in mind.
One direction in which UANI is channeling its energies is to get multinational corporations to end their business dealings with Iran.
For instance, last week UANI called on US Congress to ensure that the InterContinental Hotels Group end its business with the Iranian regime or lose its lucrative contacts with the US government, including the US Army.
The InterContinental hosted Iran;s delegation at this week;s meeting of the United Nations Human Rights Council in Geneva and has hosted Iranian President Mahmoud Ahmadinejad in New York during the UN General Assembly.
According to Wallace, the Iranians should be forced to do what the delegations of poorer countries do when travelling abroad – stay at the home of the ambassador.
Asked about the likelihood of the sanctions actually working, Wallace – sounding like Netanyahu – said the proof is in the pudding: we will know they work when the Iranians stop their nuclear program.
But, he said, there are signs that the economic isolation is extracting a price, that the Iranian economy is “on the precipice: and its economy – as evident by the reeling rial – was feeling the sanctions.
The problem with this scenario, one Asian diplomat pointed out this week, is that it assumes an economic squeeze could get the Iranians to stop. North Korea was squeezed so bad economically that its people were starving, the source said, yet Pyongyang continued its nuclear march.
But, said Wallace, who in his UN role uncovered a corruption scandal in North Korea involving the UN Development Program, there are significant differences between the North Koreans and the Iranians.
Primarily, he said, North Korea is a closed society with a very homogeneous population.
Iran, by contrast, is more open and more business oriented toward the West and has a 42-percent minority population. It is, he said, susceptible to sanctions.
There are only four ways from the outside to move a country’s policy, Wallace pointed out: through diplomacy; economic sanctions to isolate it; special operations, such as computer viruses or “work accidents”; and military action.
The private sector can only impact on one those areas.
But it is an area, he said, well worth exhausting before the bombers are called in.