The central banks of Russian and Iran have signed a deal to connect national interbank communication and transfer systems to spur trade and facilitate transactions. Per the deal, 52 branches of Iranian banks and four unnamed foreign banks will use Iran's local interbank telecom system, known as SEPAM, to connect with 106 banks using Russia's System for Transfer of Financial Messages or SPFS, according to The Central Bank of Iran.

Iran's Shahr Bank and Russia's VTB Bank will be involved in the related pilot programme and other lenders will join gradually. Circumventing sanctions According to officials from Iran’s central bank, the deal is a big step forward in implementing countermeasures against banking sanctions applied to Iran and Russia. The two local interbank systems cannot be sanctioned and their infrastructures are not controlled by other governments.

The contract is the first step outlined in the join action plan of banking cooperation signed in 2022 by the two central banks. This will pave the way for all Iranian banks to interact with Russian lenders. Representatives from the Russian side stated that their interest lies in enhancing ties with Iran’s banks, noting that the agreement will help promote bilateral trade, and a defining feature is that it cannot be sanctioned.

More details about the intercom systems SPFS is the Russian equivalent of the SWIFT financial transfer system developed Russia’s central bank. It is in place since 2014 when the United States government first threatened to disconnect Russia from the SWIFT system. SEPAM (a Persian acronym) currently functions as a venue through which interbank transactions are conducted electronically.

It is said to be capable of being connected to foreign banks. Settlements in national currencies Trade between Russia and Iran surged by 15% in 2022, reaching USD 4. 6 billion, as per Russian government officials.

The two countries are taking big steps to build mutual trade. It is important for them to use settlements in national currencies more actively. Much has already been done in this regard – now the share of the ruble and the rial in mutual settlements exceeds 60%.

Work on the joint application of national payment systems is being completed. VTB provides banking services to Iran Russian state-owned VTB launched a new service allowing both individuals and businesses to transfer money to and from Iran, the lender said. With this move, VTB, which has been subject to sweeping western sanctions since February 2022, has become the first lender to provide banking services to Iran, which is pressured with some of the toughest international banking/monetary restriction.

The bank’s representatives believe that such transactions will be in high demand and that the move will strengthen economic cooperation and boost tourism between the two sides. The new service will allow money to be sent between Russia and Iran using account details within a day. VTB is planning to expand transaction services with so-called ‘friendly’ nations, a classification describing those that have not imposed sanctions on Russia.

Payments are currently available to bank clients in more than ten former CIS states and some Asian countries. .