Iran, Russia Sign Financial Cooperation Agreement

EghtesadOnline: Iran and Russian central banks signed agreements to boost ties on new financial and monetary fronts as part of the latest Iran-Russia Banking & Financial Group Meeting on Thursday.

News ID: ۷۸۳۱۷۳

07 July 2018

During the meeting, which took place between Hossein Yaqoubi Miab, Iran central bank’s deputy for international affairs and Bank of Russia deputy chief Dmitry Skobelkin in Tehran, the two sides signed a document to strengthen financial cooperation and remove the existing barriers in the way of normal banking relations.

As reported by the CBI website, the agreement includes  directions for reducing the time and paperwork involved for Iranian banks when they open accounts with their Russian peers.

Other points of agreement emphasize the creation of an inter-bank messaging system between the two central banks, establishing currency swap agreements and utilizing reinsurance capacity in bilateral banking and financial cooperation, Financial Tribune reported.

Last year, during President Hassan Rouhani’s visit to Moscow, the two sides agreed to continue cooperation to help  stabilize the global energy market and underpin sustainable economic development. They said they will work out desirable conditions for using national currencies in two-way trade.

According to officials from both sides, Iran and Russia are currently conducting bilateral trade in their local currencies, rial and ruble respectively plus the euro.

At Thursday’s meeting, Skobelkin said currently 24 Iranian banks and credit institutions have correspondent ties with seven Russian lenders and some of the banks conduct  operations in local currencies.

“Bank of Russia, like in the past, is prioritizing settlements in local currencies and based on existing data, a third of the two country’s transactions are now settled in local currencies,” Skobelkin said.

Hoping that the two countries’ economic relations would expand, the Russian official noted that his central bank is  prepared to remove limitations in the way of effective banking ties.

Persisting Hurdles

Miab noted that the main issues slowing banking relations between Tehran and Moscow include refusal by Russia’s major banks to open accounts and cooperate with their Iranian peers, red tape related to Iranian lenders wanting to open accounts with their Russian peers, difficulties in repatriating Iranian export earnings to Russia, lack of euro payment facilities by Russian banks, and obstacles to opening letters of credit.

He referred to the emphasis by the two countries’  presidents to expand trade ties and  said in the year ending March 20, Iran’s exports to Russia reached $286 million while imports from the county stood at $704 million, which he said was far from satisfactory.

Iran has been looking for ways to drop the dollar as an international trading currency because of the lingering US sanctions and because of the possibility that more obstructions may be over the horizon.

In April, Tehran announced it will publish all its official financial reports in euro instead of the US dollar to encourage a switch to euros among state economic agencies.

Iran currently has 10 “memoranda of understanding and protocols” pertaining to monetary agreements with other countries, according to Samad Karimi, the Central Bank of Iran’s head of export department.

The issue has become all the more important for the country in the wake of US President Donald Trump’ decision to  pull out of the multilateral nuclear deal in May under which sanctions on Iran were lifted in return for curbs on its nuclear program, verified by the International Atomic Energy Agency (IAEA).

Washington has told countries they must stop buying Iranian oil from Nov. 4 or face financial consequences.