Iranian banks reconnected to SWIFT network after four-year hiatus

Tuesday, 23 February 2016 00:00 -     - {{hitsCtrl.values.hits}}

Reuters: Global transaction network SWIFT has reconnected a number of Iranian banks to its system, allowing them to resume cross-border transactions with foreign banks after the lifting of sanctions on Tehran, a SWIFT official said.

Iran’s re-entry on to the SWIFT system, four years after banks were cut off from the network, had became a political issue in the Islamic Republic in recent weeks.

Some conservative parliamentary critics of President Hassan Rouhani had complained the reconnection was not occurring fast enough and the country’s nuclear deal was not delivering the expected economic benefits.

Iran is desperately trying to boost oil exports to regain market share lost during years of sanctions, which artificially curtailed its output.

Despite the removal of the sanctions last month, only three cargoes with Iranian crude have sailed to Europe so far, a fraction of what Tehran has promised to ship to its old customers. Traders have said a slow pick up in exports was partially due to SWIFT problems.

“Nobody could pay the Iranians via normal lines, not even in euros,” one veteran oil trader based in Europe said, adding that after the reconnection he expected normal banking business to resume.

Iranian banks were disconnected from Belgium-based SWIFT, the Society for Worldwide Interbank Financial Telecommunication, in March 2012 as international sanctions tightened against Tehran over its disputed nuclear program.

The system is used to transmit payments and letters of credit and Iran’s exclusion damaged its ability to conduct foreign trade and money transfers. Under a nuclear deal reached between Tehran and world powers, most sanctions against the country were removed last month.

“SWIFT has completed the on-boarding process for these banks and can confirm that they have now been reconnected to SWIFT,” said Onur Ozan, a country manager at SWIFT.

“We will continue to work with the remainder of the entities that have applied to rejoin SWIFT to ensure their smooth reconnection,” Ozan said in a statement carried on the Iranian central bank’s website on Wednesday.

Ozan did not give details of the Iranian banks that had been reconnected. The central bank said in its statement that all banks not covered by remaining sanctions had been connected, including itself, but some of the banks’ foreign subsidiaries and branches were still working on it.

Although SWIFT’s action will make it easier to move money into and out of Iran, many foreign banks are expected to remain wary of doing business with the country, at least initially.

The nuclear deal says non-U.S. banks may resume trading with Iran, but because Washington retains sanctions against Iran that predate the nuclear crisis and were imposed over other issues such as human rights, bankers are uncertain of the legal basis for business and worry they could still be targeted by U.S. officials.

U.S. banks remain prohibited from doing business with Iran directly or indirectly.