Israel Matzav

Missing SWIFT may not slow down Iran's trade

In an earlier post, I reported that international money clearer SWIFT will bar Iran from using its services effective Saturday. That seemed like a devastating blow to the Iranian economy. But the Miami Herald reports that it might not be quite as strong a blow as first thought.

Iranian presence in several countries of the hemisphere has been documented, but many activities remain a mystery. One unconventional mechanism developed by Iran, with the help of Venezuela and Ecuador, is a way to bypass the economic sanctions, as Iran may be using a parallel financial system operated by members of ALBA countries — the Cuba-Venezuela-Bolivia-Ecuador-Nicaragua axis — to elude financial sanctions by the West and engage in money-laundering.

According to confidential bank reports, in November 2008 the Central Bank of Ecuador authorized the establishment of “a mechanism for deposits and payments to facilitate foreign trade” with Iran. In closed sessions, the Central Bank of Ecuador approved a system allowing the confirmation and payment of letters of credit for foreign trade transactions between it, the Export Development Bank of Iran (EDBI) and the International Development Bank in Caracas (BID).

By that time, both the EBDI and the BID had been already added by the U.S. Treasury Department Office of Foreign Assets Controls (OFAC) to the lists of Specially Designated Nationals as companies that do business with Iran’s defense establishment. The documents show that the Central Bank of Ecuador knew about and decided to ignore this fact when signing the agreements with Iran and Venezuela. Mere days after the signing of the agreement, EDBI extended credit facilities to the BCE for $40 million for “importation of Iranian goods and services to Ecuador.”

Parallel to the signing of the agreements, the ALBA countries created a “Unique System of Regional Compensation” (SUCRE, in its Spanish acronym). The SUCRE is a virtual currency unit adopted by ALBA nations in order to replace the dollar in regional trade. The SUCRE’s existence makes it possible for these countries’ central banks to offset their accounts directly, without making use of correspondent banks abroad. Consequently, ALBA nations can bypass foreign banks’ supervision when they wish to hide certain international transactions. Therefore, the only assessors of the legality of these transactions are the very same suspect central banks that use the SUCRE for their foreign transactions.

Read the whole thing. Sanctions? What sanctions?

Labels: Iran sanctions regime

posted by Carl in Jerusalem @ 4:43 PM