Sanctions vice tightens on Iran over nuclear dispute

The sanctions vice is tightening on Iran, cutting it out of key global financial networks, but Tehran is taking urgent steps to withstand the pressure over a nuclear program the West suspects is intended to produce bombs.

The SWIFT system, which handles most cross-border payments, said in Brussels on Thursday it would disconnect Iranian institutions blacklisted by sanctions from its messaging system on Saturday at 1600 GMT, after a European Union order and pressure from the United States.

Money exchange houses in the Gulf said they were ceasing dealing in the risky Iranian rial, in another blow to Tehran's trading channels.

Meanwhile, shipping data showed that vessels carrying at least 360,000 tonnes of grain are lined up to unload in Iran, in a sign Tehran is stockpiling huge amounts of food to blunt the impact of tougher Western sanctions.

The Islamic Republic has even begun buying wheat from its arch-enemy - the United States.

The sanctions make it difficult to obtain letters of credit or conduct international transfers of funds through banks.

So instead, Iran has bought around 2 million tonnes of wheat since February at a premium to international prices in currencies including Japanese yen and Russian roubles.

"There is no doubt in my mind it is geopolitical hedging. They are trying to get as much as they can in the country to blunt the effect of any further escalation in international sanctions," Rabobank commodities analyst Nick Higgins said.

The sanctions regime exempts food.