In March 2012 something unprecedented happened. A country was cut off from SWIFT, the Belgium-based Society for Worldwide Interbank Financial Telecommunication. In this case, the disconnecting of Iran was an effort to contain Iran’s disputed nuclear program. The narrative was that Iran’s exclusion would damage its ability to conduct foreign trade and money transfers, since the system is used to transmit payments and letters of credit globally and locally. Belonging to global financial networks opens up an endless amount of opportunities, but once severed from the system, who pays the price?
The severity of the crippling economic pressure imposed on Iran led to the nuclear deal of 2015 where economic sanctions were lifted in return for limitations to the country’s debated nuclear energy programme. The side effects of the sanctions were many, ranging from unemployment and inflation to regime change. The people of Iran, tired of global financial sanctions, elected Hassan Rouhani, a reformist, to follow the populist hardliner Mahmoud Ahmedinejad in an attempt to restore living standards.
SWIFT, with its headquarters in Brussels, operates the largest international money transfer mechanism and is vital to international money flows, exchanging an average 18 million payment messages per day between banks and other types of financial institutions in 210 countries. According to the SWIFT website, it enables the global community to communicate securely and exchange standardised financial messages reliably, thus facilitating global financial flows, and supporting trade and commerce all around the world.
Expelling 25 Iranian banks from the Society for Worldwide Interbank Financial Telecommunication shut down Iran’s main avenue to doing business with the rest of the world. The effects reverberated not only through Iran’s economic structures, but reflected heavily on the local population.
Why does this matter?
Cutting off a country completely from the international financial system in this day and age has an all-encompassing impact. SWIFT cutting off Iranian banks was the first time the West reached so deep into the global banking system to short-circuit financial mechanisms that a society relies on. It is significant because the aggressive nature of the sanctions regime created a situation where the ends justified the means. Disconnecting all Iranian banks from the SWIFT system blocked critical services related to the wellbeing of the Iranian people. The provision of food and medicine was affected, and noncommercial family remittances were impeded.
But just like water will carve its way through stone to create the Grand Canyon, so will money find its way to flow. In the midst of the most aggressive sanctions, expat-Iranians would travel to visit family members with suitcases full of cash or medical supplies. In such a situation of financial short-circuiting, ordinary commerce will become deeply dependent on the international criminal network in order to function at all. This creates even more insecurity for the most vulnerable in such a situation.
The dire situation on the ground in Iran also led to vocal discontent among the people towards former president Ahmedinejad who eventually had to concede power to his follower Rouhani. One of Rouhani’s main campaign promises was to relieve sanctions and restore living standards. This resonated well with the Iranian population and the reformist Rouhani was elected president with the consent of the Supreme Leader, Ayatollah Khamenei, who saw in Rouhani an opportunity to bring to an end the nuclear confrontation with global powers while not destabilising the entire regime already suffering from the sanctions. The election of Rouhani also seemed to delight the West, since highest-level direct contact between the US and Iran was established for the first time since the revolution in 1979.
Global finance and human security
The case of Iran’s severance from SWIFT serves as a reminder of the depth and magnitude of the interconnectedness of the global economy. Economic interaction and interdependence is not something that happens in a hidden strata beyond most of us. It affects us every day in a plethora of ways. This case raises questions of the mechanisms in which national interests and ideologies are enmeshed with global security concerns to justify debilitating measures against a regime.
In this age of interdependency and interaction, what befalls a government or a regime, will first and foremost impact the people on the ground. When foreign remittances stop flowing, when the state economy starts to dwindle, when discontent erupts, the daily lives of people become insecure and eventually unbearable. In Iran’s case, all because of a severed SWIFT connection.
By Anna Bernard
Teheran, ilee_wu, CC BY-ND 2.0
imam khomeini, seier+seier, CC BY-ND 2.0
Money!, Hans Splinter, CC BY-ND 2.0