Iran and Russia have signed a memorandum of understanding (MoU) to use their own financial messaging system for bilateral trade between the two countries.

It will enable financial institutions in the two countries to bypass the Swift financial messaging system to support messages exchanged between banks involved in letter of credit (L/C) and guarantee business.

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Deputy governor of the Central Bank of Iran, Mohsen Karami, says the MoU is the result of work jointly undertaken by Iranian and Russian banks over the past year, and is intended to foster cooperation and interaction amongst banks, merchants and businessmen in the two countries.

"The messaging networks of the two countries' banks are connected to each other as of today, and this provides a chance for the member banks in [the] country's national banking system to exchange standard banking messages with the Russian banks," Karami told Iran's Fars news agency on Monday.

L/C implications

"Iranian banks no longer need to use Swift...with Russian banks, which can be for the opening of L/Cs and transfers or warranties," the deputy governor added.

He also said that the all Iranian banks abroad and foreign banks connected to the national Russian banking messages services, which include 100 banks in 13 other countries, will now be able to exchange messages with Iranian banks.

Iran has been disconnected from Swift since the 2018 reimposition of sanctions due to Tehran's nuclear programme while many Russian banks have been barred from the international messaging system since Russia's invasion of Ukraine.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.