Swift, the international body that handles global banking transactions, said it will cut Iranian banks out of the international system.
Analysts have seen it as a move to enforce international sanctions against Iran.
Swift follows European Union sanctions against Iran over its nuclear programme. United States also accused Iran of trying to develop nuclear weapons, a charge that Iran denies.
Swift’s move may isolate Iran financially by making it almost impossible for money to flow in and out of the country via official banking channels. It will also hit its oil industry, but may also have a heavy impact on Iranians who live abroad and send money home.
Almost all banking transactions pass through Swift, the Society for Worldwide Interbank Financial Telecommunications.
Iran agreed last week to hold talks with six major world powers over its nuclear programme, although no date or venue has been set yet. It will pull the plug at 16:00 GTM next Saturday 17th March, in what is all but the final blow to Iran business dealings.
Swift’s announcement coincides with news that major money exchange houses in United Arab Emirates, a financial center used by Iran to acquire foreign currency, have stopped handling Iranian rials over the last few weeks. It has further reduced Iran’s ability to trade in international markets.
Iran has seen its business activities restricted by United States anti-money laundering legislation, which made it risky for banks around the world to do business with the country, including trade financing.
Swift’s decision is heavily reliant on Iranian oil industry. China and India have said they will still take oil from Iran, but the only obvious way for Iran to be paid for it is now in gold.
Analysts said Swift’s decision would make it now impossible to conduct business with Iran. Iranian Business council in Dubai stated if Iranian banks cannot exchange payments with banks around the world then this will cause the collapse of many banking relations and many businesses.
By its side, Lazaro Campos, chief executive at Swift, said that disconnecting banks is an extraordinary and unprecedented step for Swift. And added that the decision is a direct result of international and multilateral action to intensify financial sanctions against Iran.