Europe, U.S. look at risky penalty on Iran

WASHINGTON — The United States and Europe are considering unprecedented punishment against Iran that could immediately cripple the country's financial lifeline. But it's an extreme option in the banking world that would come with its own 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 U.S. and its allies contend is a drive toward developing and building nuclear weapons. It also perhaps would buy time for the U.S. to persuade Israel not to launch a pre-emptive military strike on Iran this spring.

The last-resort financial effort suggests the U.S. and Europe are grasping for ways to show immediate results because economic sanctions have so far 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.

Meanwhile, violence is increasing. Explosions in Bangkok on Tuesday — Israel's defense minister labeled them an "attempted terrorist attack" — came the day after Israel accused Iran of trying to kill its diplomats in India and Georgia. Those attacks followed the recent killings of Iranian scientists.

In the financial world, the United States can't order SWIFT to kick Iran out. But it has leverage in that it can punish the Brussels-based organization's board of directors. Talks are focused now on having Europe make the first move.

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

The Obama administration is divided over whether the possible gain is worth the risk in trying to threaten SWIFT into kicking 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, and blocking it from using the respected transfer system would be a black mark like no other.