Financial Times | Sam Fleming,�Philip Stafford and�Jim Brunsden: The US and EU are heading for a showdown over how to handle one of the linchpins of the global financial system following Donald Trump�s decision to re-impose sanctions on Iran.

The US has declared its determination to sever Iranian banks and the Tehran central bank from foreign financial institutions as it increases sanctions in the coming months.�Part of doing so will probably involve ensuring the Belgium-based Swift network, whose financial messaging system facilitates cross-border payments, cuts off the Iranian banking system as it did before the Joint Comprehensive Plan of Action in 2015.

Swift, which sent more than 7bn messages last year, severed links with Iran in 2012 after the US pressured the EU to impose sanctions. Following the passage of the Iran nuclear deal in 2015, Swift reopened links.

The question now is whether the EU will co-operate with any US requests for those connections to be severed again and whether Swift will find itself caught in the crossfire of a transatlantic dispute over sanctions, analysts say.

Richard Nephew, a scholar at Columbia University�s Center on Global Energy Policy, said: �I absolutely see this as a flashpoint between both sides. Swift has maintained it will only do what it is instructed to do from Brussels and there is no indication that the EU will bend on this point for the Trump administration.�

The US pushed for years to get the Swift sanctions imposed back in 2012, so obtaining a deal could be even more difficult this time round given the fractious relations between the US and EU.

In a statement, Brussels-based Swift said US Treasury guidance suggested a ban would not come into effect until early November. �As there has been no related change to EU legislation we will naturally be consulting with and seeking clarification from both EU and US authorities. Our mission remains to be a global and neutral service provider to the financial industry,� it added.

Swift connects more than 11,000 banks around the world and sent an average 28m messages a day in 2017. According to one person briefed on the discussions, the UK, France and Germany may try to negotiate carve-outs for their institutions and payments systems most likely to be affected by sanctions, and would also include provisions for Swift.

Elizabeth Rosenberg, a senior fellow at the Center for a New American Security and a former US Treasury adviser on Iran and North Korea sanctions from 2009 to 2013, said there were routes open to the US should it not get EU co-operation on Swift.

One idea that has been discussed in the past would be for the US Treasury to target the entire board of Swift. But Ms Rosenberg said this would be a poor idea given the 25-strong board comprised senior executives from a range of member institutions including major western banks. �The US could not be more clear that they are going after Swift,� she added.

�Fighting the Americans on Swift is a powerful if high-risk option for the Europeans,� said Behnam Ben Taleblu, a research fellow who focuses on Iran at the Foundation for Defense of Democracies. �America must clearly convey its intention to enforce sanctions and work to prevent Europe from contesting any of these penalties come November. The open question is what is Swift�s tolerance for risk, and what side of the Atlantic will it follow. Legally they have to follow Brussels, but America has huge economic power in this situation.�

The US Treasury declined to comment. But its recent guidelines suggest that US sanctions on the provision of specialised financial messaging services to the Central Bank of Iran and Iranian financial institutions will be re-imposed after a 180-day wind-down period ending on November 4 2018.

Other financial infrastructure providers could also garner attention, especially international central securities depositories Euroclear and Clearstream, owned by Deutsche B�rse. The utilities are where both the asset and cash meet and are swapped, and the deal is treated as final.

In 2013 Clearstream agreed to pay $152m to settle allegations by Washington that its settlement business may have violated US sanctions on Iran. Its subsequent policy has been not to engage directly with Iran or Iranian-owned entities.

Euroclear said it would abide by all laws applicable to it and said it would need to analyse the scope of any sanctions.