EU orders Belgian-based firm to halt Iran bank transfers

EU countries ordered Swift to act earlier on Thursday, following pressure from the US, Iran's main antagonist on the world stage.

Its decision became EU law when it was published in the Official Journal on Friday, which said: "It shall be prohibited to supply specialised financial messaging services, which are used to exchange financial data, to the persons and entities referred to in [previous EU sanctions decisions]."

A statement by the US treasury "commended" the EU for its actions, with a special mention for "prompt action" by the Belgian treasury. "Substantially increased pressure is needed to convince the Iranian regime to address the international community’s concerns about its illicit nuclear activities," a US treasury official responsible for counter-terrorism, David S. Cohen, noted.

According to Swift's latest public figures, 19 Iranian banks and 25 related institutions in its system in 2010 sent and received some 2.3 million financial "messages" relating to wire transfers.

The company in total handles $6 trillion of transactions a day worldwide. It had earlier pleaded that EU sanctions should not stop it doing business with designated firms because it first needed to hammer out "the right multilateral legal framework" to address the issue.

For her part, Maja Kocjancic, an EU foreign relations spokeswoman, confirmed that the Swift ban concerns Iranian banks only, but not Syrian banks, which are also on an EU blacklist.

The Iranian banks to be hit by the freeze include the Central Bank of Iran, Bank Tejarat, Onerbank, First East Export Bank, Bank Mellat, the Export Development Bank of Iran, Bank Saderat Iran, Future Bank, Mehr Bank, Bank Melli, Arian Bank, Assa Corporation, Bank Kargoshaie, Bank Refah, Europaisch-Iranische Handelsbank, Export Development Bank of Iran, Post Bank and Bank Sepah.

Most of them are based in Tehran, but the network of subsidiaries and affiliates stretches also to Bahrain, China, Germany, Malaysia and the UK.

EU documents accuse Bank Tejarat, for instance, of helping the country to buy yellowcake uranium. They say Bank Melli "facilitated numerous purchases of sensitive materials for Iran's nuclear and missile programmes" by opening letters of credit and hosting accounts.

The EU sanctions themselves contain loopholes, however.

Member states can still do business with the Iranian central bank if it relates to trade in non-nuclear and non-oil-related items, such as food or textiles, and if they make sure the money does not go to any regime officials on the EU's blacklist - not easy to prove given the opaque nature of the administration.

With several EU countries using Bank Tejarat to finance their diplomatic missions in Tehran, the bank can still handle their money "in so far as such payments are intended to be used for official purposes of the diplomatic or consular mission or international organisation."