What Does the Economic Convergence of Russia and Iran Mean?

Dareen Cone
Dareen Cone Economy
3 Min Read

The political intention to deepen economic connections between Russia and Iran is clear, but there are still obstacles. The new governor of Iran’s central bank, Mohammadreza Farzin, declared last week that Russia and Iran had made substantial progress toward connecting their banking infrastructures in the face of Western sanctions.

The Central Bank of Iran (CBI) claims that after years of effort, the two nations have connected Iran’s SEPAM national financial messaging service to Russia’s Financial Messaging System of the Bank of Russia (SPFS).

What is SPFS, and What is its Significance?

The Society for Worldwide Interbank Financial Telecommunication (SPFS) is the Russian analog of SWIFT, the international system for financial messaging and transfer. Its objective is to connect it with other significant powers like China and India. 

what does russia and iran rapprochement have to do with the invasion of ukraine?

Waves of US sanctions began in 2018 when then-President Donald Trump unilaterally withdrew from Iran’s 2015 nuclear deal with international powers and shut out the entire Iranian financial system from SWIFT. The nuclear accord’s restoration talks are still at a standstill. 

Iran claims that as of right now, all of its few dozen financial institutions can engage with Russian banks in addition to the more than 100 banks from 13 other, primarily Eurasian, nations that have access to SPFS.

What Does Russia and Iran Rapprochement Have to Do with the Invasion of Ukraine?

The declaration comes at a time when Russia and Iran have become closer over the last year due to Russia’s invasion of Ukraine, which led to increased Western sanctions on Russia. Iran had also come under fire for allegedly sending drones to Russia before that country invaded Ukraine in February 2022.

According to Hamidreza Azizi, a fellow at the German Institute for International and Security Affairs, Iran was more interested in structured banking cooperation than Russia before the Ukraine war and the sanctions it placed on Moscow, but it now appears that both countries are pushing for it.

However, according to Azizi, the Russian system will not become a competitive alternative to SWIFT in the near future since it requires participation from or perhaps leadership from other major economies like China and India.

What Steps have been Taken Toward the US Dollar and the Euro?

To progressively lessen the influence of the US dollar and the Euro on their economies. Tehran and Moscow are also simultaneously working to increase the use of their national currencies in trade.

In July of last year, the Russian rouble was formally added to the list of available currencies in NIMA, a central bank-regulated, state-run foreign currency market for Iranian importers and exporters.

Keep reading: DeFi Protocols Converge to Support Permissionless Web3

Share this Article
Experienced Journalist with a demonstrated history of working in the financial services industry. Skilled in Management, Banking, Strategic Planning, Business Development, and Teamwork. Strong community and social services professional with a Bachelor's Degree focused in Economics.
Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *