A risky bid on tough Iran sanctions

WASHINGTON - The United States and Europe are considering unprecedented punishment against Iran that could immediately cripple the country's financial lifeline. But that extreme option in the banking world would come with costs.

The Obama administration wants Iran evicted from SWIFT, an independent financial clearinghouse that is crucial to the country's overseas oil sales. That would leapfrog the current slow-pressure campaign of sanctions aimed at persuading Iran to drop what the United States and its allies contend is a drive toward developing and building nuclear weapons. It also might buy time for the United States to persuade Israel not to launch a preemptive military strike on Iran this spring.

The last-resort financial effort suggests the United States and Europe are grasping for ways to show immediate results because economic sanctions have failed to force Iran back to nuclear talks.

But such a penalty could send oil prices soaring when many of the world's economies are still frail. It also could hurt ordinary Iranians and undercut the reputation of SWIFT, a banking hub used by virtually every nation and corporation around the world. The organization's full name is the Society for Worldwide Interbank Financial Telecommunications.

The United States cannot order SWIFT to kick Iran out. But it can punish the Brussels, Belgium-based organization's board of directors. Talks are focused now on having Europe make the first move.

Short of expulsion, Washington and representatives of several European nations are in talks over ways to restrict Iran's use of SWIFT to collect oil profits.

The Obama administration is divided over whether the possible gain is worth the risk in trying to force SWIFT to kick out a member country, in part because of concern that it would set back the global financial recovery. Iran remains a global financial player despite years of banking sanctions; blocking it from using the respected transfer system would be a black mark like no other.

More than 40 Iranian banks and institutions use SWIFT to process financial transactions. Losing access to that flow of international funds could badly damage Iran's economy. It would also probably hurt average Iranians more than current banking sanctions do because prices for household goods would rise while the value of Iranian currency would drop.