Iran is being placed under more drastic economic sanctions as it continues to remain stubbornly silent on its nuclear program. Over in Europe, the IMF has finally agreed to contribute to Greece’s second international bailout fund.
Up to 30 banks cut off from SWIFT
In an effort to step up pressure on Iran to give up its purported nuclear weapons development program, the Belgium-based company Society for Worldwide Interbank Financial Telecommunication (SWIFT) was asked by the EU to cut off ties with 30 Iranian banks listed on the EU sanctions blacklist.
SWIFT is a global network responsible for most international transactions and is also used by most of the world’s major banks. The move will have major consequences for Iran’s oil industry and will make it difficult for citizens to receive money from relatives living abroad. Moreover, it will cripple Iran’s ability to conduct international business and will further isolate the country from the world economy.
The financial system announced yesterday that it will comply with the EU order, and will implement the ban on the Iranian banks from this Saturday at 1600GMT henceforth. According to SWIFT’s chief executive Lazaro Campos, the move “is a direct result of international and multilateral action to intensify financial sanctions against Iran”.
The decision came after US President Obama and Britain Prime Minister David Cameron met in Washington, where Mr. Obama pointed out that “the window for solving [Iran’s nuclear issue] diplomatically is shrinking”. The US Treasury itself has blacklisted 23 Iranian banks, the bulk of which have been also targeted by the EU. Despite this, the US Congress is threatening penalties against SWIFT’s board and direction if they don’t cut all ties with Iran’s financial sector.
Banks to be cut off from the network include Iran’s Central Bank, Persia International Bank, Bank Melli, Bank Mellat and Post Bank. Officials believe that many of these banks are funding Iran’s nuclear program, although oil experts have said that Iran will still be able to sell oil without using SWIFT since not all of its banks will be placed under the ban. This move will be in addition to EU’s embargo on Iranian oil that is expected to come into force in July. It has also put restrictions on hundreds of other firms and officials. As of yet, however, there has been no reaction from Iran.
Report: Global network expels as many as 30 of Iran’s banks in move to isolate its economy [New York Times, 15 March 2012]
Report: Swift cuts ties with Iran banks after EU ban [Wall Street Journal, 15 March 2012]
Report: Iran cut off from global financial system [Associated Press, 16 March 2012]
IMF says yes to €28 billion bailout
The International Monetary Fund (IMF) approved a €28 billion bailout for Greece yesterday. IMF managing director Christine Lagarde said that “the new Fund-supported program will enable Greece to address [its] challenges while remaining in the euro zone”. However, she also pointed out that the “risks to the program remain exceptionally high, and there is no room for slippages”.
Meanwhile, the IMF has granted the immediate release of €1.65 billion to Greece. Greece will receive a total of €172.7 billion in rescue loans from its Eurozone partners and the IMF over the next four years. The funds are expected to allow heavily indebted Greece to stay afloat while it restructures its economy, as well as deal with its recession and high unemployment rates.
The IMF has been struggling to help Europe recover from its debt crisis, lending support to countries like Portugal and Ireland. It has also been urging Italy and Spain to make budget cuts and changes in economic policy.
There has been concern over Greece’s ability to meet its targets, as it has failed to do so in an earlier bailout program. IMF mission chief to Greece Poul Thomsen has acknowledged this, but said that the IMF would support Greece’s rescue effort as long as Athens stuck to its program. He believes that “there is a much reduced risk but there is also a sense there is still risk”.
Report: IMF approves euro28BN funding for Greece [Associated Press, 16 March 2012]
Report: IMF approves new Greek bailout, warns on missteps [Reuters, 15 March 2012]