According to local media, Iran and Russia linked their national payment systems on Monday, a key step toward bypassing the US dollar in bilateral trade. The integration of Russia’s Mir and Iran’s Shetab payment systems was inaugurated at a ceremony attended by Mohammad-Reza Farzin, Governor of the Central Bank of Iran (CBI), and Kazem Jalali, Iran’s Ambassador to Moscow, as reported by Xinhua, citing Iran’s official news agency IRNA.
This event marked the launch of the first phase, enabling Iranian citizens to withdraw cash in rubles from Russian ATMs using their Iranian bank cards. In the second phase, Russian nationals will be able to withdraw cash in Iran, while the final phase will allow Iranians to use their bank cards at Russian stores through point-of-sale terminals.
“This is a significant step toward de-dollarization and strengthening economic ties between Iran and Russia,” Farzin said, as quoted by the semi-official Fars news agency.
This is a strategic move to facilitate direct financial transactions without relying on the US dollar. Here’s a breakdown of what this means:
1. Bypassing the US Dollar
- Traditionally, international trade and financial transactions are often conducted in US dollars. However, Iran and Russia are both under US sanctions, which restricts their access to dollar-based global financial systems. By linking their payment systems, the two countries can settle trade and other financial exchanges directly in their national currencies (Iranian rial and Russian ruble), effectively bypassing the need for US dollars.
2. Phased Implementation
- Phase 1: Iranians can now use their Iranian bank cards in Russia to withdraw cash in rubles from ATMs, making travel and business transactions easier.
- Phase 2: Russians will soon have similar access in Iran, allowing them to withdraw Iranian rials.
- Phase 3: The final phase will let Iranian bank cards make purchases directly in Russian stores via point-of-sale (POS) terminals, creating seamless financial integration for Iranian citizens in Russia.
3. Economic and Political Implications
- This partnership marks an important step in “de-dollarization,” meaning it reduces these countries’ dependency on the US dollar and the global financial system controlled by Western economies. By doing so, Iran and Russia strengthen their ability to trade with each other despite sanctions, which have otherwise limited their access to international financial networks, such as SWIFT.
4. Banking Sector Adaptation
- Initially, four Iranian banks are providing this new service, but more are expected to join as necessary banking infrastructure and regulatory adjustments are made to support cross-border transactions with Russia. This shows that both countries are investing in upgrading their banking systems to accommodate each other’s currencies and systems.
5. Broader Economic Cooperation
- This integration reflects a growing trend of economic cooperation between Iran and Russia, extending beyond just the banking sector. By linking their economies more closely, they are building resilience against sanctions and creating a model for future partnerships, potentially inspiring other sanctioned countries to explore similar arrangements.
In essence, this move allows Iran and Russia to trade more freely with each other by creating a financial pipeline outside of the dollar-dominated global system. It’s a significant step in these countries’ efforts to counteract the economic impact of sanctions and build greater autonomy in their economic relations.
