Russia and Iran are integrating their banking systems in order to get around being banned from SWIFT, the critical communication system for global bank payments.
Several Iranian central bank officials confirmed the partnership with Russia’s central bank on Monday, Reuters first reported. However, Russia’s central bank has declined to comment on the matter or issue an official statement on its website.
The new communication system forged by Iran and Russia will connect roughly 700 Russian banks and 106 foreign banks from 13 other countries, Karimi said. Russia is aiming to use the new system to increase their trade volume with Iran to $10 billion a year, according to a recent report. It also plans to work with Iran to develop a gold-backed cryptocurrency to challenge the US dollar.
“Iranian banks no longer need to use SWIFT … with Russian banks,” Mohsen Karimini, the deputy governor of Iran’s central bank said to a local news outlet.
“The financial channel between Iran and the world is being repaired,” Mohammad Farzin, Iran’s chief central banker added in a statement on Twitter.
Iranian banks were first ousted from SWIFT in 2018, when the US reimposed sanctions on Iran after it exited the landmark nuclear agreement. Select Russian banks were also banned from the communication system last year after Russia invaded Ukraine.
Being barred from SWIFT led to serious consequences for both nations’ banking systems, as the Belgium-based messaging network is critical to facilitate financial transactions between banks. SWIFT links over 11,000 financial institutions in over 200 countries, sending on average 42 million messages a day, according to its website.
The ban also effectively blocks Russian and Iran from their foreign currency reserves, making it difficult to fund their respective economies.
Russian president Vladimir Putin has rebuked western efforts to isolate Russia from the global economy, and previously said Russia would respond by strengthening its ties with friendly nations. It’s taken a particular interest in deepening ties with Iran, which has struggled economically amid heavy western sanctions.
Iran will continue to struggle economically unless the country sees economic growth, Iran’s Supreme Leader, Ali Khamenei, said in a televised speech on Monday. According to Iran’s Statistics Center, inflation has skyrocketed past 50%, and over half of the population lives below the poverty line.