The six-member group’s finance ministers are exploring the possibility of a unified payments network and will formally discuss the plan in Russia at the next annual meeting of the bloc in 2024.

The Russian Finance Minister, Anton Siluanov, says the network would boost independent efforts to create payment messaging systems.

“We are trying to introduce our financial messaging system, the SPFS, our Chinese colleagues have their own system, other BRICS countries also either have their systems or are creating them,” Siluanov said.

He pointed out that it would allow the bloc to continue its de-dollarization efforts and move away from Western influence on global settlements.

He added, “This is why this issue is to be discussed by money authorities and financial agencies of BRICS member states.”

It comes after BRICS, which stands for the states of Brazil, Russia, India, China and South Africa, formally decided to expand the group to Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the UAE.

Siluanov said the bloc is focused on “removing all ties from the West to the Southeast” in a growing trend that will “persist in the future.”

Experts say the West led by the United States and its closest Western allies has led to such a plan.

Analysts have been saying the world is swiftly evolving from the unipolar system to a multipolar one where the U.S. dollar as the world reserve currency will gradually see a decline in value and appeal.

This process won’t happen overnight, but the proposals to have, for instance, a BRICS currency is viable, which is in the interests of BRICS members to avoid being subject to the U.S. dollar domination.

SWIFT is a component of the global banking system and is used by banks to securely send and receive financial transactions, but critics have accused the United States of abusing the system, depriving other countries and companies of legally trading with each other.

During the last BRICS summit In August, South Africa’s finance minister said a BRICS-based payments system would aim to strengthen trade in local currencies as opposed to the U.S. dollar, but noted that it would not be a competitor to SWIFT.

Brazil has also strongly pushed for a common currency to be used in transactions between member states.

Analysts say the idea is a logical process in the face of what has been taking place in the world.

At the present time, the United States is a major absorber of capital internationally but it is in so much debt that it is unable to finance its own investment by itself.

The U.S. is increasingly dependent on the survival of its own economy from the financial intake and investments of other countries. Money that belongs to other countries and

which can be invested domestically and help develop the domestic services of nations, rather than being sent to the U.S., where it is being invested on the basis of “faith”.

That faith is now slowly eroding thanks to Washington’s disastrously domestic and hawkish foreign policies.

Essentially, what Washington has been doing is calling on other nations to invest their funds in the United States and develop America’s economy.

But today, that appears to be something that is not very much in the interests of the international community anymore.

BRICS, on the other hand, is developing a win-win relationship between countries.

With China being the largest economy, Beijing is also a massive exporter of funds, which enables it to assist other BRICS members.

The members of BRICS – Brazil, Russia, India, China and South Africa – as well as the six new invited members – Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the UAE – do not necessarily have the same system of governance.

As it happens, there are differences between some of the members.

What they do have in common is an interest to focus on the expansion of their own national development rather than having their assets being held in the United States, a country that has proven to be an unreliable partner over the past decades.

New developing alliances and initiatives such as BRICS, the Shanghai Cooperation Organization or the Belt and Road Initiative are a breath of fresh air for the dozens of countries that have become members of such organizations or expressed an interest in becoming a member.

Critics accuse the U.S. of weaponizing its dollar as well as weaponizing the SWIFT payment system, which will sooner rather than later backfire on Washington.
If the U.S. had been neutral in its foreign economic policy, it would not have been facing any challenges, but the U.S. failed to do so.

Washington has used its dollar as a tool to force other countries to change their policies in line with that of the U.S. or face heavy punishment. The latest evidence of this is the Ukraine war.

But there are too many examples, which has made the U.S. dollar both dangerous and a threat to international peace and security.

Analysts have accused global financial institutions, such as SWIFT, the World Bank, and the International Monetary Fund of serving U.S. interests.

Weaponizing the SWIFT system and the U.S. dollar, in essence, is unilateral U.S. sanctions?, which affect not only countries that are subject to America’s illegal sanction regime but international entities who are hit with sanctions for breaking unilateral U.S. sanctions, where, in fact, they are trading legally under international law.

This is why experts argue that the matter is urgent and has been recognized by many in the international community, including the U.S. allies who do not speak about the issue in public for fear of U.S. backlash.

BRICS is being seen as one of the most important organizations to counter this.

It is natural that every country puts its interests first, but every country takes exception to being put under economic pressure by Washington to readjust their own foreign policy agenda.

As a result, experts say it would be natural for a shift away from trading in the U.S. dollar that will see different countries forging closer and warmer relationships.

Experts argue that the process of de-dollarization will happen at some point, just like the British sterling was the global reserve currency before being taken over from that capacity by the U.S. dollar.

The U.S. has major domestic problems and major international problems by meddling in the affairs of other states, which has seen its credibility decline.

At the same time, America has a national debt of at least $33 trillion, which is growing every year, making investors increasingly skeptical about putting their investments in U.S. treasury bonds.

Russia has reportedly stated that BRICS is currently in discussion with BRICS members to create its own answer to SWIFT. This would present yet another opportunity for the bloc to create a multilateral world.

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ACU members agreed in a summit in the Iranian capital Tehran on Wednesday to launch their own banking messaging system within a month, according to a deputy governor of the Central Bank of Iran (CBI).

“The (ACU) countries decided to have a customized system for themselves considering that SWIFT is not available to all countries and given that it has its own costs,” said Mohsen Karimi, CBI’s deputy for international affairs.

Karimi said the messaging system will cover all demands for clearing monetary transactions among nine members of the ACU.

The move is in line with statements by ACU members in recent months suggesting they are eager to join regional and international efforts to reduce the weight of the US dollar in global trade, a process which has become known as de-dollarization.

Countries like India and Iran, who are key members of the ACU, have accelerated efforts to de-dollarize their foreign trade, especially since a war broke out in Ukraine in early 2022, leading to Russia’s exclusion from SWIFT.

CBI governor Mohammad Reza Farzin, who became ACU’s rotating chair on Wednesday, said the bloc will seek to admit new members and will diversify the basket of currencies it accepts for payment settlements to help the de-dollarization campaign.

Belarus and Mauritius applied for ACU membership during the Wednesday summit in Tehran where top bankers from non-member states like Russia were also present.

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IRAN NEWS ECONOMIC DESK

TEHRAN – Chairman of Iran-Italy Joint Chamber of Commerce Ahmad Pourfallah warned Iranian policy-makers and elites that if the country does not restore link with the SWIFT and join the FATF, the removal of sanctions will have no effect because the country will be unable to transfer money even after lifting the sanctions.

Speaking to ILNA, Pourfallah talked about the current trade condition between Iran and Italy, saying that for many years and especially in decades after the victory of the Islamic Revolution, Italy has been Iran’s trade partner number one as Iran has experienced the record of 1.8b euro trade volume with Italy until ten years ago and Italy always used to meet the demands of its refineries by purchasing oil from Iran.

He went on to say that Italians used to buy Iran oil because their refineries’ systems were adjusted to Iran crude oil and they changed their refining systems through huge investment to replace Iran oil with oil from other countries. He added that returning to the previous condition is difficult but these are golden opportunities that Iran has missed.

Pourfallah further said that according to the available statistics, the trade volume of Iran and Italy before the outbreak of Coronavirus was around 600m euros which is insignificant but in comparison to other countries, Iran’s trade with Italy has not been cut and it still goes on narrowly especially small and medium size companies which have no ties with the U.S. have no problem in trade with Iran.

He admitted these small companies form a small portion of trade and Iran should seek a higher level of trade with major companies in the world.

Pourfallah added that Iran economy ranks 18 or 19 in the world and it should have more share of the global trade. He reiterated that sanctions and snubbing the FATF have great impact on the trade. He said having no SWIFT link with other countries has created headache for the country and opportunists take advantage of this condition and national interests of Iranians are imperiled.

He expressed hope with some openings in the international level which are happening, the sanctions would gradually become colorless.

He reiterated that policy-makers and elites should know this fact that even if the sanctions are lifted and the country does not restore link with the SWIFT and join the FATF, they will be useless because if one cannot transfer money, lifting the sanctions will be of no use.

Pourfallah said Italy is still standing by Iran and it has not been carried out by the certain emotions and both countries have kept their trade ties narrowly.

On the amount of Iran’s blocked assets in Italy, he said the amount of Iran’s money in Italy is not as much as in the countries like China, India and Iraq but the blocked money belongs to the last oil consignments sold to Italy which has not been repatriated and it is not a big figure and it is around 4 or 5 billion dollars.

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IRAN NEWS ECONOMIC DESK

TEHRAN – Chairman of Iran-China Joint Chamber of Commerce says currently there is no banking transaction with Russia and China and if an individual with Iranian passport wants to enjoy banking services, he will be denied by both countries’ banks.

Speaking to ILNA, Majid Reza Hariri said that Iran’s current problem is not just the SWIFT issue but the issue is that no bank is ready to cooperate with Iran because of being suspect for money laundering regardless of the U.S. sanctions.

Recently Reuters reported that Chinese banks have been urged to leave SWIFT system’s messaging and to launch its own Chinese version due to the U.S. sanctions.

Hariri said that Iran’s problem for trade is not the SWIFT because no bank is ready to cooperate with Iran because of money laundering.

He said Iran is currently facing with two major problems in its banking system: the U.S. sanctions which risk any country cooperating with Iran and Iran’s rejection of joining the FATF which has created problem.

Hariri added that the FATF in recent weeks by writing to the world banking system has called Iran a risky country whose financial transactions should be highly controlled.

He admitted that today there is no banking transaction with Russia and China and even an individual with Iranian passport wants to get banking service in both countries, he is denied.

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“Our recent talks with officials from Turkey and Russia centered around ditching dollar and bypassing SWIFT in our trade transactions,” he said.

“Accordingly, we are moving toward using alternative payment systems and conducting our business through national currencies,” he added.

Noting that at the moment, a major part of Iran’s transactions with Russia, Turkey and Iraq is done via the use of national currencies, the CBI governor said “we made a proposal to the Russian side for using an alternative payment system with the Eurasian Economic Union (EAEU) member states now that Iran is a member, too, and the Russian president welcomed the proposal.”

“New conditions will be formed in the banking transactions of regional countries,” Hemmati promised.

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According to the released report, transfer of international funds is one of the challenges of securing imports of raw materials and intermediary goods. “One of the solutions we can offer is to develop bilateral or multilateral monetary agreements with countries that have common import and export principles with our country. Exports and imports can be done with any country without the need for money transfer and only through accounting operations,” the report said.

“Using this method in interactions with China, the United Arab Emirates, Turkey, South Korea, India, Japan and Italy can safeguard at least half of the country’s total foreign trade from sanctions. Of course, as good political relations are needed, this kind of cooperation seems to be a priority with China, Turkey and India,” it added.

“A bilateral monetary treaty has been signed between Iran’s central banks with those in Pakistan and Turkey so far. The Turkish contract has entered into an operational phase and Iran’s Melli Bank has so far opened a number of Letters of Credit, but the issue has been suspended for a long time. Unfortunately, the monetary mechanism of this contract is done via SWIFT thus all the information will be provided to the US Treasury Department. The contract with Pakistan has not entered the operational phase yet,” it continued.

“It is noteworthy that the Bank of China has already signed 41 bilateral currency swap agreements with developed countries such as Switzerland, Canada and the United Kingdom besides less developed and high-inflation countries such as Belarus, Argentina and Nigeria,” it added.

“One of the most important challenges in making these treaties operational is that exporters in each country will prefer to trade in world currencies rather than national one. Therefore, the success of this idea requires providing an appropriate incentive mechanism to lure active presence of business players in this field,” the report concluded.

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A look at the mentality and practical framework behind the designing of the sanctions against Iran shows that there has been a turning point in how US imposed sanctions around 2010.

Triangle of the US monetary ammunition

US secondary sanctions, the standards of the Financial Action Task Force (FATF) and Swift Services, are three sides of the monetary triangle that contain the global financial system or the global banking system that can be called “monetary ammunition triangle”.

Secondary bank sanctions at the top of monetary ammunition triangle

The US secondary bank sanctions are at the top of monetary ammunition triangle. The implementation of US banking secondary sanctions is divided into two generations based on the way they were enforced. The first generation, which were created and implemented before 2010 on the basis of the executive orders of the President.These sanctions enjoy a posteriori approach and targets the end of the banking service chain.

All of the financial institutions of the Islamic Republic of Iran were affected by this kind of sanctions, including the Bank Melli Iran, Export Development Bank of Iran and Bank Saderat Iran.

This generation of banking sanctions defines a series of individuals, transactions and institutions and then slaps sanctions against them and stipulates that anyone who offers financial services to sanctioned institutions or individuals; it will be sanctioned or placed on the America’s Specially Designated Nationals (SDN’s) list.

But the second generation of banking sanctions imposed by US after 2010 aimed to force the world’s largest banks  to be coordinated with US in imposing sanction. It means that it will force these banks not to provide banking services to individuals and entities that are sanctioned.

Therefore, the focus was on the beginning of the banking services chain, i.e. the big international banks, and the access to dollar payment system is the main leverage. The approach of this generation of sanctions is a priori (deterrent) and aims to isolate sanctions targets in the global banking system.

This sanction strategy was followed by the laws of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), Iran’s Freedom of Law Act and the Coping with Iran’s (IFCA) activities. The rules stipulated that banks either knowingly or unknowingly provide sanctioned targets with services, will encounter restrictions on their brokerage accounts in US.

FATF’s position in imposing US secondary sanctions

If the the second-generation of secondary banking sanctions is going to be successful, the banks should be able to track transactions that are being made by sanctioned targets. This requires that the actual beneficiaries of each transaction be identified.

According to David Cohen, the US Treasury’s undersecretary for terrorism and financial intelligence in the years 2011 to 2015, there must be enough infrastructures in order to create financial transparency so that it can be found out whom the sanction targeted countries are working. so they can be prevented from continuing their activities. This transparency is essential for both generations of secondary banking sanctions.

The FATF or the Financial Action Task Force plays a role in this regard. The FATF’s 40 recommendations, which have been developed with US engagement, all seek to enhance global financial transparency. Providing credible information to identify customers and validating this information, and then sharing this information with banks and foreign entities, are examples of recommendations from this group that can lead to the distinguishing of sanction targets from non-sanctioned ones.

The FATF’s standards have focused on two dimensions of producing accurate information about economic relations and their sharing. These two dimensions are very effective in completing the sanctions puzzle.

Swift role in monetary ammunition triangle

There is a need for a series of simplifications and fluctuations as imposing sanctions and subsequently implementing FATF standards, create barriers in the process of global business, cause difficulties for economic and global interactions, and ultimately make no attractiveness and cost to the world’s banks.

In this case, SWIFT is engaged in facilitating and simplifying the enforcement of sanctions standards and trying to reduce costs for sanctions by providing services including sanction screening, know your customer (KYC REGISTERY), and know your customer’s customer.

SWIFT’s new service is being developed in this regard and It can no longer be considered as a simple messenger. In fact it is becoming a tool for projecting power in line with US administration policies.

Dollar domination on global exchanges, an effective factor for US monetary ammunition

What has made the US sanctions to be implemented through FATF and SWIFT standards is size of the US economy which is bigger that the size of the world economy and also US dollar’s domination on global exchanges.

According to statistics, US owns about 25 percent of the world’s gross domestic product (GDP) and about 65 percent of SWIFT exchanges are traded at US dollar. This issue has led the world’s largest banks to obey US sanctions, due to their urgent need for the dollar.

It should be noted that the countries will not have problem wit dollar domination issue over the next few years, but they will face the US monetary ammunition triangle that they have to look for ways to get rid of it.

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 Russian President Vladimir Putin said that Moscow is working with its major partners to create financial systems that are not dependent on the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

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