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International Payments Are Becoming A Geopolitical Battleground

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The German foreign minister is calling for an end to the American monopoly over what is essentially a European payment system. And it’s all about SWIFT—which has suddenly become one of the biggest tools in an emerging geopolitical battle.

Trump has threatened to impose sanctions on SWIFT—the messaging system used by banks for cross-border payments—if the system refuses to remove Iranian banks from its directory. For German Foreign Minister Heiko Maas, moving to kick Iran out of SWIFT would mean a definitive end to the nuclear deal.  

Maas isn’t having it. Speaking to the German daily Handelsblatt he said the answer may be found in the creation of a new global payment system that bypasses the American bullies and operates independently. Maas admonished Europe for allowing the Americans to act “over our heads and at our expense”, calling on the EU to strengthen its autonomy by essentially setting up a ‘European Monetary Fund’ with its own SWIFT system.

The new system, in this scenario, would not cave to influence from Trump, who is now threatening SWIFT's board members with everything from asset freezes and criminal charges to travel bans or restrictions on conducting business in the U.S. That would, however, mean banning some of the biggest banks in the world because SWIFT’s board is the Who’s Who of banking, including Citigroup’s Yawar Shah and J.P. Morgan’s Emma Loftus, plus 23 other major banks.

That Europe is livid is understandable. After all, SWIFT is a European-based global payment network (Belgian, to be exact) and it enables financial institutions worldwide to send and receive information about financial transactions. Related: The Disruption Of The Banking Sector Has Already Begun

SWIFT was never supposed to be political—or at least not when it comes to Western versus Western nations. It has been used to help enforce sanctions against Iran in the past—but now that the Western world isn’t of a single mind on Iran, SWIFT could become a geopolitical tool of a very different nature. 

Even though it was born in Brussels, it has quickly become American-controlled, for all intents and purposes.

It’s also been a key element of the fight against terrorism for both the U.S. and the European Union. But that’s not without its controversy, either: Again, Brussels bows to Washington by giving U.S. intelligence agencies unrestricted access to information about European companies through SWIFT.

In fact, it’s a goldmine of information that U.S. intelligence can access when you consider that over 11,000 financial institutions in more than 200 countries and territories use SWIFT.

Enough is enough, says Maas.

“[…] It’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system,” the minister wrote.

"It is high time to re-evaluate our partnership … The Europeans must become a mainstay of the international order, a partner for all who are committed to this order," Maas stated.

Related: Are U.S. Bonds The Next Big Investment Trend?

While the U.S. is pushing European companies to drop any business with companies that operate in Iran, the European Union has threatened to punish any firms that obey Washington on this.

And German Chancellor Angela Merkel's conservative CDU/CSU alliance has welcomed proposals by the foreign minister to protect companies from U.S. sanctions fallout, no one knows for sure whether Trump is serous about targeting the 25-bank SWIFT network, or if Europe is capable right now of re-inventing the wheel independently.

When it comes to SWIFT 2.0—Juergen Hardt, CDU/CSU foreign policy spokesman, told reporters in Berlin that he thinks the proposal “is worth exploring”. But he also hinted at skepticism over whether Berlin could successfully protect German companies from U.S. sanctios on Iran.

By Linas Jegelevicius for Safehaven.com

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