After pulling out of the landmark 2015 nuclear deal with Iran in May 2018, the United States is due to take the most draconian measure against the Islamic republic. After November 5, the country will be reimposing hefty sanctions on Iran, with an aim to halt its oil exports. Washington has been targeting Iran’s financial system, with an aim of isolating it from the global financial community. It has been pressuring the Belgian-based financial messaging service SWIFT, which intermediates the bulk of the world’s cross-border dollar-denominated transactions, to cut Iran from the system, as it did before the nuclear deal, in 2012. On Sunday, the Treasury Secretary, Steven Mnuchin also confirmed it by saying that the US is already working on disconnecting Iran from the SWIFT network, unlike the 2013 Iran blockade by Obama.
He said that this would make it harder for countries to get waivers on Iran oil sanctions. Besides, Mnuchin also dismissed concerns regarding the potential rise in oil prices, saying that the market had already factored in the output losses.
As reported by Reuters, the US Treasury Secretary said that countries would have to reduce their purchases of Iranian oil roughly by more than the 20 per cent level they did from 2013 to 2015 to get waivers.
“I would expect that if we do give waivers it will be significantly larger reductions,” said Mnuchin.
He also said that in order to achieve the US goal, the US Treasury was already in negotiations with SWIFT network on disconnecting Iran. His comments came two weeks before the Trump administration reimposes oil and financial sanctions against Iran.
The threats from Steven Mnuchin also confirmed that the Trump administration could impose penalties on SWIFT unless it disconnects from Iran, even though the US does not hold a majority on its board of directors.
He also gave assurance of the objective, which is “to make sure that sanctioned transactions do not occur,” whether it happens “through SWIFT network or any other mechanism.” The Treasury Secretary said that their goal is to ensure that the sanctions are “enforced.”
Steven Mnuchin also predicted that the sanctions will lead significantly impact the Iranian economy, as major companies exit the market with the fear of US retaliations. He said that the impact can be seen already, but his expectation is to witness “a significantly larger impact,” after the sanctions go into place. He also remarked that “the economic squeeze will be very big over the next two years.”
On the other hand, Iran believes that for the remainder of Trump’s term it can stave off severe economic damages from the US sanctions. However, the fact is that the Iranian currency has dropped in the black market in anticipation of the enactment of US sanctions, as the economy has slowed down substantially.
The top leaders in Iran have lashed out at Washington for intensifying the economic blockade on the country. The Iranian supreme leader, Ayatollah AliKhamenei condemned the US sanctions as economic “sabotage,” making specific mention of diaper shortage, in a speech in early September.
Meanwhile, the Trump administration is afraid that Russia could help Tehran evade US sanctions by buying up Iranian oil and reselling it as its own. A senior administration official said that they would be discouraging Russia for even “considering” this idea, and that it would be in its best interest to not “facilitate Iranian evasion of US sanctions.”
Steven Mnuchin informed that the Treasury Department would be working in identifying the banks that would be allowed to cess transactions for humanitarian funding to Iran,“as quickly as possible,” including all those banks that would be isolated.
On the contrary, the European nations are seeking to ensure at least one Iranian bank stays connected to the world. French senator Philippe Bonne carrere said that the European efforts to help Iranians, despite the US sanctions is “difficult but it’s possible.”
While the United States is making all its efforts isolating Iran from the rest of the world, the analysts have predicted that due to the sanctions, the oil exports of Iran could fall by as much as two-thirds, straining the oil markets.
While the United States strategizes to remove large volumes of Iranian oil from the market, shielding the consumers from higher prices of oils will only depend on the ramp-up ability of other producers, mainly Saudi Arabia.
Will the US be able to successfully isolate Iran from the world market? Will Iran just wait for the Trump to get dethroned or will it do something to save its economy? The impact of SWIFT network card is though debateable currently.