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Move blocks Iranian banks from world payments system

WASHINGTON — A move Thursday by a Belgian-based financial-transfers company to block Iran from global transactions is expected to isolate the country further and send it tumbling back toward a barter economy.

The move by the Society for Worldwide Interbank Financial Telecommunication is the latest and perhaps the severest of a host of international sanctions designed to discourage and delay, if not destroy, the Islamic nation's nuclear weapons program. It goes into effect Saturday.

The sanction disconnects 30 major Iranian banks from the SWIFT system, which handles most cross-border money transfers, leaving the nation without a way to transfer money in and out of the country securely and quickly. Experts say the effects will be felt almost immediately in government offices in Tehran, in the corridors of business and in family kitchens.

They note that while Iran will remain able to sell oil abroad — or to buy goods using gold as currency — payment and collections become extremely complicated without access to the international standard for transferring money. It can continue to transfer money through smaller Iranian banks unaffected by the move, although small banks are unable to handle the volume Iran needs to keep its import and export economies rolling.

And Iran can, for instance, continue to trade oil for goods with India, Pakistan and other nations. McClatchy reported earlier this week that Iran and Pakistan were negotiating a barter deal in which Pakistan would supply up to 22 million tons of wheat in return for discounted electricity and oil products.

"But Iran doesn't necessarily need what India has to offer," noted Matt Levitt, an Iran expert at The Washington Institute for Near East Policy. "This move has both financial and symbolic significance. Iran remains a very proud nation, and this casts them as a pariah."

The move came a week after the United States, the European Union, China and Russia agreed to resume long-stalled talks over Iran's nuclear program, and Iran dropped its refusal to allow U.N. inspectors into a military complex that U.S. officials suspect is involved in developing a secret nuclear-weapons program. Iran says its program is for peaceful uses.

That agreement had eased fears of a military confrontation. Thursday's action by SWIFT had been anticipated, but some lawmakers on Capitol Hill continue to push for even harsher sanctions, including extending the ban to all Iranian banks.

Lazaro Campos, who heads SWIFT, said that European Union sanctions had forced the move, which he called unprecedented.

"Disconnecting banks is an extraordinary and unprecedented step for SWIFT," Campos said in a statement. "It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

"The EU-sanctioned Iranian financial institutions and the SWIFT customer community have been notified of the disconnection," he said.

John Byrne, the executive vice president of the Association of Certified Anti-Money Laundering Specialists, a global organization that works to combat financial crime, also saw the move creating problems for Iran.

"It would have a very serious impact on Iran's ability to engage in commerce," he said. "This is going to be clearly felt fairly quickly."

With the recent raft of sanctions, Iran already had been forced to move much of its commerce through intermediary countries, which served as financial middlemen and allowed it to continue to engage in world markets.

Byrne noted that those countries risked getting locked out of SWIFT if they continued dealing with Iran.

"This is the ultimate decision in the financial sector," Byrne said. "Once you move on this, there is certainly no turning back."

Levitt said that this move — as deeply as it might cut into Iran's economy — was unlikely to force a change in the Iranian nuclear program on its own.

"Really effective financial tools like this, if paired with a credible military threat, could work," he said.

(Kevin G. Hall contributed to this article.)


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