Trump Helpless Against Alternative Payment System Designed To Circumvent Sanctions (#GotBitcoin?)
Europe Gears Up Trade Mechanism. Trump Helpless Against Alternative Payment System Designed To Circumvent Sanctions (#GotBitcoin?)
European officials confirmed at Friday’s meeting that a trade mechanism, known as Instex, was now operational and was starting to process its first few transactions. Seven European countries said they would join France, Britain and Germany in their work on Instex, which seeks to allow trade between European and Iranian companies without the need for direct financial flows.
Iranian officials say Europe needs to do more to encourage the country to stay within limits of 2015 pact.
Iran said it would proceed with its plans to stop complying with some limits in the 2015 nuclear accord, but left the door open to a pause in those steps after European countries made progress in opening a trade channel to cushion the blow of U.S. sanctions on Tehran.
Friday’s developments mean Europe might win valuable time for diplomatic efforts aimed to defuse heightened tensions between the U.S. and Iran over Tehran’s recent military actions and its nuclear work.
Abbas Araghchi, Iran’s deputy foreign minister and a key player in Iran’s nuclear negotiations, said he would report back to Tehran on the progress made by European governments in developing a mechanism to cushion the impact of tight U.S. sanctions on Iran. He didn’t rule out the possibility that Iran would pause more drastic steps to move away from the 2015 deal.
Officials from Britain, France and Germany met with Iranian, Russian and Chinese officials Friday in Vienna, with the aim of persuading Tehran not to exceed limits set in the 2015 nuclear accord, which set tight limits on Tehran’s nuclear work in exchange for the suspension of most international sanctions.
“I can say one step forward compared to the previous meetings…But it is still not enough and it is still not meeting Iran’s expectations,” Mr. Araghchi said. “I would certainly report back to Tehran the developments that took place in this meeting…and the final decision obviously would be by Tehran to take.”
Iran is expected to surpass in coming days a limit imposed in the nuclear deal on its stockpile of enriched uranium, a material that can be used to fuel a nuclear weapon. Iranian and European officials indicated after Friday’s meeting they still expected Tehran to exceed this cap.
However, Iranian officials had warned they could take additional bigger steps to move away from the accord from July 7, including enriching uranium to 20% purity—closer to weapons grade—and measures to renew work on its Arak plutonium reactor. Mr. Araghchi said that he doubted they would be paused but that it wasn’t his decision to make.
France, Britain and Germany set up Instex in January but it wasn’t operational until now. On Wednesday, The Wall Street Journal reported that the mechanism would be given a credit line—or advanced payments system—of a few million euros to help the system get going. Officials confirmed that Friday.
Until now, other European countries had been reluctant to get directly involved in Instex, in part because of U.S. pressure to avoid the scheme. However Sweden, Spain, the Netherlands, Finland, Belgium, Slovenia and Austria said in a joint statement they would back the scheme. The Dutch confirmed they will become shareholders. Others are expected to follow.
U.S. officials largely have been dismissive of the European trade mechanism. Some U.S. lawmakers have called for sanctions to be prepared either against Instex or against a mirror Iranian company that is supposed to net out Iranian exports and imports from Europe in a similar way.
Britain, France and Germany have a special trade channel up and running with Iran that aims to circumvent U.S. economic sanctions, the EU said in a statement.
“France, Germany and the United Kingdom informed participants that INSTEX had been made operational and available to all EU Member States and that the first transactions are being processed,” the EU said in a statement, referring to the channel’s formal name.
Iran has also established an entity to trade with Europe, while some more EU countries are joining INSTEX as shareholders, the statement said, following talks between the remaining signatories to the Iran nuclear deal – Russia, China, Britain, France and Germany – after the United States pulled out.
European Alternative To Swift Is The Instex System
For a long time, Ukraine’s current government has been following a strategy based on the good old Chinese approach: “If you wait by the river long enough, the bodies of your enemies will float by.” Chinese stratagems are applicable only to the Chinese. Sitting by the river might take thousands of years, and the Ukrainian Cabinet of Ministers has only five years.
Ukraine has no time to wait. Nevertheless, the general state strategy relies precisely on “passive assiduity.” Our officials guaranteed us that the Crimean bridge would not be built, the Russians would not host the World Championship, the Nord Stream – 2 would never be launched, and the sanctions would immediately kill Russian economy, and Russian Federation would collapse soon.
One of these expectations is the topic of disconnecting the Russian Federation from the SWIFT payments system.
Recently, SWIFT issue has been widely discussed by the EU, which does not fully agree with the “hawkish” US policy against Iran and the Russian Federation.
The EU has applied the so-called blocking regulations as a preventive measure to formulate a policy independent of the United States against Iran. The extraterritorial sanctions of the United States are not applied to European companies. The EU regulation prohibits its companies to comply with the US sanctions requirements.
EU High Representative for Foreign Affairs and Security Policy Federica Mogherini announced the launch of a project to create an alternative system that could secure financial transactions with Iran, bypassing US sanctions radars. As conceived by the European functionaries, this system might become a global project. Theoretically, something similar can happen if the US sanctions against the Russian Federation are strengthened, if Europe does not want to join them. In this case, the alternative transaction program will include the Customs Union countries and, possibly, China.
Everything would be fine, and the EU’s blocking regulation could completely level the entire US sanctions package if not for one small detail. At the moment, SWIFT is an international interbank system of information transfer and making payments between banks and their customers. The bank must be a member of this system in order to use the money transfer services within the overall system. If a financial institution does not comply with the established regulations, including with regard to the control of customers’ operations, it may be restricted in conducting international settlement transactions or excluded from the list of participants, as it happened with Iranian banks.
The legal status of SWIFT is a cooperative society registered in Belgium under local law; it unites more than 9,000 banks from almost two hundred countries of the world. The annual turnover of transactions is 4-5 billion payment orders. Daily financial turnover is 6 trillion USD.
Today, financial transactions are monitored by the United States using the ECHELON Global Electronic Intelligence System technology, and structures such as the National Security Agency (NSA) in the United States are connected to it. That is why the bank customers believe that payments in euros go faster and are less monitored than similar transactions in dollars.
The introduction of US sanctions against SWIFT would result cutting off 34% of its payments (that is how much dollars transactions were made in 2018).
In fact, Ukraine is on the verge of a very painful failure of its foreign policy. Something similar has already happened with the projects to bypass Russian gas pipelines. We have lost our first passing move several years ago, although at first Ukraine managed to block the Black Sea South Stream through the transit of Russian gas to Bulgaria and to the European market. As it turned out, the Bulgarians supported us idly. After all, South Stream gradually transformed into TurkStream, silently taken by Kyiv. Then, Nord Stream 2, which can completely transfer our transit potential to zero profitability, was also missed by Ukraine.
Now Ukraine practically prefers not to notice launching of a European alternative to SWIFT – the INSTEX system. Ukrainian Foreign Minister likes to repeat that the dependence of Russian gas exports on the Ukrainian GTS does not allow Russians to intensify aggressive actions against Ukraine. In fact, a universal sanctions weapon that can be compared with a financial neutron bomb is not a pipe, but an interbank currency transfer system, on which not only the currency reserves of the Central Bank of the Russian Federation depend, but also the currency assets of the entire Russian business and population. And the creation of INSTEX (if this system works in full-format mode) would be a major anti-authorization tool, helping the Russian to eliminate the basic transaction risks from the United States.
The Beginning Of The End Of SWIFT: Russian Banks Join Chinese Alternative Global Payments System
With Russia actively dumping US dollars and buying gold at the fastest paced in decades, the writing is on the wall when it comes to what the Kremlin thinks of any possibility for a detente in the painfully strained US-Russian relations.
And with Russia now clearly seeking to end monetary ties with a dollar-denominated “west”, there is just one alternative – China. Which is why it will probably not come as a surprise that several Russian banks joined the China International Payments System (CIPS) also known as China’s “SWIFT”, to ease operations between the two countries, according to a senior official at the Central Bank of Russia (CBR).
“As for the cooperation on payment systems, a range of banks are already connected to CIPS, allowing to facilitate payments routing procedure,” Vladimir Shapovalov, who heads a division dealing with foreign regulators at the CBR’s international cooperation department, said earlier this week during the international Russian-Chinese forum.
Meanwhile, as RT writes, the regulator hopes that in turn, Chinese counterparts will pay more attention to Russia’s own SWIFT alternative, the SPFS (System for Transfer of Financial Messages), as “it can further boost bilateral trade”, the official added.
As RT adds, Russia has been actively demonstrating the SPFS network, which was created in 2014 in response US threats of disconnecting Russia from SWIFT, to foreign partners, including China after its export version was finished late last year. The first system transaction involving a non-bank enterprise, was made by Russian oil major Rosneft in December 2017. Some 500 participants, with major Russian financial institutions and companies, have already joined. And with Europe contemplating alternatives to SWIFT in order to keep funding the Iran regime in light of its exclusion from the dollar-based monetary system following Trump’s reimposition of Iranian sanctions, it would land a major blow to the US Dollar’s reserve status if Brussels announced that it, too, would be joining either the Chinese or Russian alternative to dollar hegemony, a process which based on reserve managers’ declining allocations to US dollars…
… is already taking place.
Japan Has FATF Green Light To Create ‘Swift Network’ For Crypto: Report
Japan is said to be leading the creation of an international cryptocurrency payments network similar to banking network SWIFT.
A report from Reuters on Thursday cites a source familiar with the effort as saying that the network is aimed to combat money laundering and was approved last month by the Financial Action Task Force (FATF).
A team from the international money laundering task force would monitor development of the project, which will be conducted alongside other nations, the source said.
The network is an initiative from Japan’s Ministry of Finance and the Financial Services Agency (FSA) watchdog. Reuters said both agencies would not comment when contacted.
Japan had been more closely scrutinizing crypto exchanges as the host of a June meeting by the G20 group of nations, and also launched a working group to discuss regulatory issues around Facebook’s Libra cryptocurrency prior to the G7 meeting last week.
The nation has suffered a number of notable hacks of crypto exchanges, including two of the world’s biggest and most shocking: Mt. Gox and Coincheck.
Largely as a result of the Gox breach, Japan has been one of thee most proactive countries when it comes to regulation of cryptos. In 2017, it created a licensing scheme for exchanges and amended its financial rules to allow bitcoin as a legal payment method.
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