As readers know, the western nations have been imposing sanctions on Iran for years to induce Iran to stop its nuclear weapons program. The EU is about to impose what could be the toughest economic sanction on Iran to date. CBS-News reported that the EU nations are very close to cutting Iran off from the SWIFT interbank payments system through which virtually all global transactions flow. As the first two links [1, 2] note, the EU “is preparing regulations that will shut out Iran’s banks from a major financial clearing used by virtually every country in the world,” and the EU could do this “rather quickly.” The article makes it evident that the US is dragging its feet on the matter. Few media sources have discussed this critical story. The first two links have the same story, but I thought I’d include the second link as it posted at an ex-patriate Iranian site which understands the significance of this story.
If this step is taken, it is tantamount to the EU dropping an economic/financial “nuke” on Iran. If this happens, it could promote great international traumas, may provoke a war and could even backfire on the EU.
If the EU cuts Iran off from the SWIFT system, it, presumably, will prevent all Iranian banks, companies, etc. from participating in the world’s banking system and will cause great immediate hardship. This post wishes to point out that if Russia and China support Iran firmly on this matter, the entire situation could backfire on the West and especially the EU nations. If Iran is pushed to the wall by the EU on this matter, it may push back…hard. If Russia and China join Iran’s push-back actions, it could get very dicey real fast. Vladimir Putin is known for playing hardball and he is running for re-election to lead Russia so he might welcome such a crisis to exercise his strongman reputation. China might welcome a chance to weaken the West and weaken both the Euro and the US dollar. If Russia and China are willing to play hardball along with Iran, the following steps could be quickly taken.
A. Iran could announce that it is making it illegal to purchase any Iranian products, including oil, with US dollars and Euros on the world markets. All Iranian oil and other products will have to be purchased with Iranian, Russian and Chinese currencies or gold and silver. A recent post reported that India (and perhaps China) was already prepared to purchase Iranian oil in gold so this might attract many of Iran’s other customers to use the Asian currencies or gold and silver to buy Iranian products and dump the petrodollar market altogether. The third link reports that China is close to using its rapidly-growing gold and silver reserves in a way to wrest from the western banks control of the way gold is priced on the world market. Apparently, this Chinese effort is timed to occur in June, 2012, but an Iranian crisis could motivate China to accelerate its plans. If Russia and China decide to join Iran’s actions, they could also require payments for all Chinese and Russian products to be paid for in Iranian, Russian or Chinese currencies or gold and silver until the EU nations back down on the SWIFT embargo of Iran. Russia and China could see this as a way to start weakening the hold of the Euro and the US dollar over global commerce, by setting up a rival international payments system.
B. Russia could announce that the EU action is an attack on a Russian ally and it will ban all payments in Euros or US dollars for Gazprom gas sent to European nations, and that it is cutting off Gazprom energy shipments to European nations immediately until (A) they pay in Asian currencies or gold and silver or (B) Iran is allowed back into the SWIFT program. European nation are very dependent on Russia’s energy to heat their homes and businesses and a Gazprom energy cut-off in winter will devastate European nations immediately.
C.  Iran could announce that the Strait of Hormuz is closed to all oil tankers that will be receiving payment for their oil cargoes in Euros or US dollars and that all oil tankers will need to be boarded by an Iranian naval ship to produce papers showing that their cargoes will be paid for in Iranian, Russian or Chinese currencies or gold and silver. Any oil tanker unable to produce such evidence will either be returned to its port of origin or sunk if it attempts to traverse the Strait of Hormuz (this could lead to an Iranian-Saudi war rather quickly). Iran could technically say it is not blockading the Strait of Hormuz, but it rather simply retaliating against the West by requiring all oil tankers to produce proof that their oil cargoes have been removed from the US-European-dominated SWIFT system.
If they want to pay hardball, Russia and China could swiftly send to Iran their latest air-defense systems and position their latest supersonic cruise missiles on the Iranian Persian Gulf coastlands to fire them at any oil tanker or US/NATO warship attempting to run the selective Iranian blockage of the Strait of Hormuz. If Russia and China (who backed Iran at the UN) reinforce Iran’s effort to block the Strait of Hormuz, it could lead to a battle between American/NATO and Russian-Chinese-Iranian forces. It would certainly lead to an Iranian-US battle, and that could lead to the unleashing of Hezbollah sleeper cells all over North America and Europe as well as an Israeli-Hezbollah war. Syria’s Assad, an embattled Iranian ally, could well decide that the only way for him to cling to power is to join Hezbollah in a war against Israel in order to rally his Islamic nation against the Israelis.
Keep in mind, none of the above events is certain to happen and I’m not specifically predicting any of them to occur, but I want to point out the above-described actions could happen if Russia and China decide to join their ally, Iran, in playing hardball against the West if the EU economically “nukes” Iran by blocking it from the SWIFT system. The world is growing increasingly dangerous, and it will not take much of a spark to set off a war. The EU’s cutting Iran off from the SWIFT system is one more potential spark. If the EU takes this action, I expect Iranian retaliation against the West, and Iran’s retaliation could be much more forceful than the West expects.