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An important cog in the global financial system has succumbed to pressure from the Trump administration and the breakdown of relations with Iranian banks.
The Belgian company Swift, whose messaging service connects more than 11,000 financial institutions, said the connection to the Iranian banks was severed after the United States announced Monday sanctions against 50 of the country's financial companies.
The service refused if it cut off all targeted banks. But on Friday, Steven Mnuchin, the finance minister, said Swift has to cut every Iranian bank off the list.
The quick decision will help the Trump administration to isolate the Iranian government. However, the move could deepen the gap between the United States and the European Union and strengthen the Union's determination to set up a payment system that can function independently of Washington's influence. The European Union said this year it works on such a system, but it does faces big obstacles. Payment channels are complex and must be secure. No European country has yet agreed to host the company for fear of US retaliation.
In a statement, Swift called his move to exempt certain Iranian banks from their service "regrettable," but said it had been done to preserve the stability and integrity of the global financial system.
The Trump administration announced in May that it is withdrawing from the Iranian nuclear deal of 2015 and imposing sanctions to reach a new agreement with the Iranian government.
The European Union has supported the maintenance of the 2015 Agreement and has sought to maintain Iran's economic relations with the rest of the world. But maybe the block can do little.
Large global companies, which have the prospect of being excluded from the US market if they continue their business in Iran, have kept their distance from the country.
Large international banks were particularly suspicious in Iran. In the last decade the United States beat several bank giants with harsh penalties for helping clients face American sanctions against Iran.
With American banks unable to do business with Iran and large European banks choosing to stay out of the country, Iran's banks were already cut off from most of the global financial system before Swift's decision. As a result, Swift's withdrawal could cause a smaller blow than some would expect, some sanction specialists said.
"The impact will not be as big as it was before, because it's already isolated, but it will be more difficult for them," said Katherine Bauer, a scholarship holder at the Washington Institute for Near East Policy.
Swift cut off Iranian banks when the Obama administration imposed sanctions on the country in 2012. At that time, the European Union had also introduced rules in support of sanctions, and as a unit within the bloc jurisdiction, Swift had no legal choice but to secede.
Although Western banks have largely withdrawn from Iran, advocates of tough action against the Iranian government have urged Swift to renounce relations, and fear that Iranian leaders could bypass it in order to circumvent US sanctions. However, they claimed that the approach would only be effective if Swift slowed down the relationships with all the entities listed on the list.
"If Swift shuts down all the selected banks, it really is a tougher policy," said Richard Goldberg, a senior adviser to the Foundation for Defense of Democracies, a group that supports sanctions against Iran. "If Swift does not, this is a weaker policy with a better spin