Iran and Russia have officially switched from the West’s SWIFT financial clearing system to a direct interbank transfer mechanism, the deputy head of the Central Bank of Iran (CBI) has said.
Mohsen Karimi told Iranian state television on Sunday that the system allows companies in both countries to trade in their respective national currencies instead of using the dollar or euro, FARS news agency reported.
“We have linked the financial correspondence networks of the two countries,” he explained.
“This means that the banks of our two countries no longer need Switzerland to communicate with each other and commercial banks of both countries can establish brokerage relations with each other. The [Iranian] exporter can now charge the Russian side in rials and receive money from them via Russian banks in Iran,” Karimi added, noting that the system also allows for payments in Russian rubles.
Belgium-based SWIFT is a high-security banking messaging system that enables financial transfers around the globe. While a number of countries have their own messaging systems, most global transactions are still conducted via SWIFT. Last year, key Russian banks were disconnected from the network as part of sanctions related to the Ukraine conflict.
Western restrictions forced Russia to actively promote its domestic payment system, SPFS, first introduced when the US targeted the country with sanctions in 2014, as an alternative to SWIFT. The system, which facilitates financial messaging between banks domestically and internationally, had 514 participants, including 131 foreign entities from 15 nations, as of the first half of last year.
Iran and Russia have both been targeted by Western sanctions. The countries first announced plans to scrap Western currencies from mutual settlements and use alternative financial systems in trade in 2022. During a meeting between the heads of their central banks late last month, Tehran and Moscow signed an agreement that formalized this aspiration.
Russia May Switch To Rubles In Trade With Italy
The Italian business lobby in Russia is finalizing a mechanism that would allow local buyers to pay for Italian goods in rubles, the president of the Italian-Russian Chamber of Commerce has said. In an interview, Ferdinando Pelazzo said the mechanism is expected to be ready by February 14, 2024.
“We are convinced that on February 14 we will offer the entire mechanism to our board of directors, and from the next day it will be launched. All we need is to report and get the green light,” Pelazzo stated.
He clarified that the payment mechanism will cover trade in unsanctioned goods which are permitted for import into Russia. According to Pelazzo, there are still “some financial issues” which the lobby needs to sort out, but none challenging enough for the mechanism not to be ready by the date indicated. Pelazzo previously explained that the system which the lobby is working on will allow it to pay for Italian goods in rubles, and then transfer the money to Italy from its account in a third country. The lobby has already chosen an Armenian bank for the purpose, though the name of the bank has not been disclosed.
“We have already reached an agreement with an Armenian bank, We will not only control payments, but also logistics. Currently, the costs of sending goods through Armenia and through Europe are more or less the same. The country is not very far from Italy, which will allow us to monitor the entire process more transparently,” Pelazzo stated. He also noted that the lobby has already secured permission for the new payment mechanism from the Central Bank of Italy.
Pelazzo first unveiled plans to introduce a ruble-based payment mechanism for Italo-Russian trade in July. He noted at the time that trade in unsanctioned goods such as wine and clothing has been made difficult by financial restrictions on Russia, introduced by the EU in connection with the Ukraine conflict, including the disconnection of its banks from the SWIFT international financial messaging system.
