The European Central Bank's own guidelines are particularly specific about the grounds for denying access to Target2, the system that settles transactions in euros through the SWIFT gateway. These guidelines bar access to those engaged in "money laundering and the financing of terrorism, proliferation-sensitive nuclear activities and the development of nuclear weapons delivery systems." This language describes the Iranian regime to the letter.
The Obama administration has sought to persuade key legislators that it is better positioned to pursue this matter quietly. After all, it was former Treasury Undersecretary Stuart Levey who adopted this successful approach in persuading scores of financial institutions to terminate their ties to IRGC banks. And there may be some lingering sensitivities between SWIFT and the U.S. government that could complicate Washington's reported reliance on SWIFT for important information.
But if the past few years have taught us anything, it is that sanctions against Iran often don't move forward without congressional pressure and that legislation is useful leverage in persuading international companies, not to mention their governments, to pass and enforce their own sanctions. The Obama administration, for example, initially resisted sanctions against the Iranian Central Bank and various oil-market sanctions, but after legislators passed them into law, the administration embraced them with enthusiasm. The Central Bank sanctions, co-authored by Menendez and Kirk in December 2011, have had an immediate impact. In January, Europe imposed a voluntary embargo on Iranian oil -- another factor that likely led to the Iranian rial dropping by 50 percent, forcing the regime to make painful budget choices.
There are reasonable concerns about SWIFT sanctions. With any luck, the looming congressional debate will address them and result in well-crafted legislation. Like its precedents, whatever new law emerges should be flexible in both design and application by providing the administration with the ability to issue waivers and exceptions.
An even better outcome would be for SWIFT's board of directors to take action themselves. The smartest sanctions, after all, are those that encourage people to change course on their own.