Sanctions vice tightens on Iran over nuclear dispute

The sanctions vice is tightening on Iran, cutting it out of key global financial networks, but Tehran is taking urgent steps to withstand the pressure over a nuclear program the West suspects is intended to produce bombs. The SWIFT system, which handles most cross-border payments, said in Brussels on Thursday it would disconnect Iranian institutions blacklisted by sanctions from its messaging system on Saturday at 1600 GMT, after a European Union order and pressure from the United States. Money exchange houses in the Gulf said they were ceasing dealing in the risky Iranian rial, in another blow to Tehran’s trading channels. Meanwhile, Reuters shipping data showed that vessels carrying at least 360,000 tonnes of grain are lined up to unload in Iran, in a sign Tehran is stockpiling huge amounts of food to blunt the impact of tougher Western sanctions. The sanctions make it difficult to obtain letters of credit or conduct international transfers of funds through banks. So instead, Iran has bought around 2 million tonnes of wheat since February at a premium to international prices in currencies including Japanese yen and Russian roubles. “There is no doubt in my mind it is geopolitical hedging. They are trying to get as much as they can in the country to blunt the effect of any further escalation in international sanctions,” Rabobank commodities analyst Nick Higgins said. The sanctions regime exempts food. Oil Speculation is growing that Israel, with or without US support, could launch some form of military strike against Iranian nuclear installations, which the Jewish state sees as a threat to its existence. Iran insists its nuclear energy program is purely non-military and has been adamant it will not abandon them under external pressure. On Wednesday it welcomed a new round of nuclear negotiations with six world powers, saying the two sides should set the date and venue of the talks. US President Barack Obama warned Tehran on Thursday that “the window for solving this issue diplomatically is shrinking”. British sources said Britain had decided to cooperate with the United States in a bilateral agreement to release strategic oil stocks, in an effort to prevent high fuel prices derailing economic growth in a US election year. While there is no significant disruption of world oil supplies at the moment, sanctions on Iran are expected to cut its output when a European Union embargo takes effect from July. Minor stoppages from South Sudan, Yemen and Syria also have contributed to a sharp rise in oil prices.