Latest Developments
• Russia and Iran Connect Banking System: Iran and Russia have begun linking their banking systems to allow Iranians to use their bank cards in Russia — an apparent effort to blunt the impact of Western sanctions on both countries. On November 13, Iran’s state broadcaster IRINN showed footage of cash being dispensed from an ATM in Russia using an Iranian bank card. IRINN noted that in-store cash transactions using Iranian cards will also soon be possible.
• Attempt to Bypass International Sanctions: Both nations’ banking systems are restricted from SWIFT, the international financial messaging service that is used to send and receive wire transfer instructions between bank accounts. SWIFT barred Iranian banks from the service in 2018 when the Trump administration reimposed sanctions against Iran. SWIFT dropped several of Russia’s largest banks in 2022 after its invasion of Ukraine.
• Seeking Alternatives to Western Financial Systems: Both Russia and Iran have recently pushed to create alternatives to Western financial systems. IRINN’s report noted that other countries like Iraq, Afghanistan, and Turkey could soon be linked to the same financial messaging service as well. Mohammad Reza Farzin, governor of the Central Bank of Iran, said on November 11 that Iran and Russia have completely removed the U.S. dollar from their bilateral trade transactions. Farzin also said that the second phase of the project would allow Russians card holders to use their cards in Iran.
FDD Expert Response
“Linking the two sanctioned banking systems may provide some marginal benefits, but it is unlikely to be a game changer. Iran and Russia are natural rivals and historical adversaries, with similar economies that limit their potential for complementary trade, leading to modest economic exchanges.” — Saeed Ghasseminejad, Senior Iran and Financial Economics Advisor
“First you make sure that all platforms involved are subject to secondary sanctions. Second, you make sure every other would-be participant in the world knows we will bring the hammer down on them if they connect. Third, you restore maximum pressure on Iran. Put together, you have the recipe to kill this and keep it dead.” — Richard Goldberg, Senior Advisor
“Russia has doubled down on its relations with Iran since 2022. Weapons transfers have been the main area where they’ve expanded cooperation, but the two regimes are also working to boost their economic and political ties and counter Western sanctions. While Iran will likely never be a major economic partner for Russia, this is part of Moscow’s broader effort to promote alternatives to Western-dominated institutions. — John Hardie, Deputy Director of FDD’s Russia Program
Source » fdd