Sanctions Mechanics: Why Moving Money Under Sanctions Costs More

Today on Sahmino Academy we ask what exactly gets cut when a bank is placed under sanctions. We trace the real route of an international payment and see exactly where sanctions cut it. This mechanism explains why an imported good can cost more under sanctions even if its world price never moves. SWIFT only carries the payment message; correspondent banks are the ones who actually move the money. The sending bank tells the destination bank over SWIFT to credit this account with this amount. The real funds must travel through a chain of correspondent banks before reaching the recipient. Sanctions remove a bank from SWIFT and bar foreign correspondent banks from holding accounts with it. This week the gap between Iran's free market dollar and its official exchange center rate was near twenty one percent. Imagine a normal transfer fee of one thousand dollars jumping to five thousand dollars on an alternative route. This higher cost on alternative routes is one reason Iran keeps a visible gap between its free and official rates. Iran and Afghanistan are formalizing trade settlement in rial and afghani instead of traditional barter. Sanctions usually do not freeze money; they cut the correspondent link, making transfers slower and costlier. Because banks de risk broadly, the effect of sanctions spreads well beyond the official list. So take one thing with you: sanctions raise prices through the cost of exchange, not just market psychology. Now you know the answer: sanctions cut the banking relationship, not the money itself. Got a question? Comment below.