October 09, 2018 - An internal battle is being fought inside the Trump administration to save Iran's access to international financial markets, providing Tehran with a critical lifeline ahead of the implementation of new economic sanctions, according to multiple US officials.
Top officials in the Trump administration's Treasury Department—including some who hope to save the landmark nuclear agreement—are said to be pushing for Iran to remain connected to the SWIFT banking system, an international system that facilitates cross-border transactions.
SWIFT leaders were in Washington D.C., last week holding meetings with Trump administration officials to ensure that Iran retains its access to the international banking system, which has helped keep the Iranian economy afloat as European allies seek to continue doing business with the Islamic Republic, according to US officials familiar with the situation.
While US President Donald Trump and top White House national security officials such as John Bolton have made clear that SWIFT and European allies must end their business dealings with Iran, a cadre of Treasury Department officials are said to be standing firm against this effort, paving the way for an internal showdown ahead of the Nov. 4 deadline for new sanctions, sources said.
The Trump administration is due to reimpose hefty sanctions against Iran, including secondary sanctions on financial messaging services to the Central Bank of Iran and some Iranian financial institutions.
France, Germany and the UK — which signed on to the seven-party 2015 Iran nuclear deal from which Donald Trump unilaterally withdrew in May — are frustrated that they have not been able to convince the Trump administration to take a softer line on Belgium-based SWIFT.
"President Trump instructed the administration to restore all of the sanctions from the Obama era and then some, because that's what maximum pressure means," said one US official who works extensively on Iran policy.
"During the Obama era, SWIFT disconnected Iran due to sanctions threats," said the source, who was not authorized to speak on record about the sensitive situation. "There are people inside the administration who think they can convince the president to be weaker on Iran than Obama was. That's a bold strategy. Let's see if it pays off for them."
Some details of this internal battle were first reported by the Washington Post ahead of the European visit. The Post identified Treasury Secretary Steve Mnuchin as the Treasury official leading the battle to save Iran.
A showdown on SWIFT is now likely, particularly as Iran pursues a greater number of economic partnerships across the globe.
Richard Goldberg, who wrote the original 2012 sanctions laws that excluded Iran from SWIFT before they were ended by the 2015 Iran deal, said: “The big wild card is if there is a fight in the Oval Office between Secretary Mnuchin and Ambassador Bolton”.
However, European finance ministers are determined to persuade the Trump administration not to cut off Iran’s access to SWIFT in meetings with Mnuchin at the IMF gathering in Bali this week.
“Our ask is: Why bother ripping out all of the electrical cables from a building if you can switch off a light,” said a European diplomat who confirmed the planned meetings. “If you can designate a bank [for sanctions] then there’s no need to force SWIFT to disconnect from Iran.” The disagreement over SWIFT was heading for “a diplomatic train wreck”, according to another person familiar with the matter.
The Trump administration has yet to reach a final conclusion on how to treat Iranian commercial banks.
Supporters of SWIFT worry that the international cooperative, whose 25 board directors include two US bankers from Citi and JPMorgan, would find it impossible to comply with US, European and Belgian law at the same time if their instructions diverge.
“As there has been no related change to EU legislation we are naturally consulting with and seeking clarification from both EU and US authorities,” said a senior SWIFT official.
SWIFT officials met US administration representatives in Washington last week. Some officials and people briefed on the matter believe that Mnuchin will want to act in support of SWIFT to safeguard America’s role in the secure global messaging system, which connects more than 11,000 banks in more than 200 territories, and avoid sending Iranian transactions underground.
But hardliners within the administration and on Capitol Hill who are close to Trump plan to renew their campaign to isolate Iran entirely from SWIFT.
German Foreign Minister Heiko Maas has argued that Europeans could create their own rival to SWIFT based on the euro rather than the dollar. Russia and China are both pursuing their own systems.
“Hope remains that there might be a complete carve-out for SWIFT,” said a person following the matter, adding Mnuchin could in theory advocate for a delay or waiver in implementing any sanctions directed specifically against SWIFT.
UK and French finance ministers are due to meet Mnuchin at the IMF meetings, as is Valdis Dombrovskis, the EU commission vice-president responsible for financial services policy. Germany’s finance minister may also meet with him.
European diplomats are also pressing the US to exempt SWIFT from transactions penalties on humanitarian grounds, to ensure the provision of food and other non-sanctionable consumer goods to the Iranian people. “
The US has some discretion in this area,” said Elizabeth Rosenberg, a former senior Treasury adviser who previously worked on tightening Iran sanctions. “There’s probably an elegant solution here for SWIFT and the US Treasury, which surely doesn’t want to be in a position of taking an enforcement action with SWIFT.”