Iran, Russia move to link banks to evade Western sanctions

DUBAI, United Arab Emirates -

Iran and Russia have taken a key step toward linking their banking systems in a move that further boosts their cooperation in the face of Western sanctions, an Iranian official said.

At a signing ceremony on Sunday, Mohsen Karami, the deputy central bank governor, said banks in the two countries had connected their messaging networks following agreements reached over the past year, according to the state-run IRNA news agency.

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It was not clear whether those links would allow for the transfer of funds, and services were not yet available to bank customers. Karami said 100 banks in 13 other countries were connected to the network, without naming them.

There was no immediate comment from Russia or the United States, which has worked with its allies to isolate both countries.

In response to Russia's invasion of Ukraine nearly a year ago, Western countries banned key Russian banks from the Belgium-based SWIFT financial messaging system, which daily moves billions of dollars around the world among more than 11,000 banks and financial institutions.

The Trump administration took similar action against Iranian banks as it reimposed crippling sanctions after withdrawing the U.S. from a nuclear agreement with world powers in 2018.

Cutting banks off from the SWIFT system severely limits a country's ability to acquire foreign capital and trade internationally, and is among the toughest financial sanctions available.

Iran and Russia have strengthened ties following Russia's invasion, with Iran supplying attack drones that have dive-bombed infrastructure and other civilian targets across Ukraine. After initially denying that it had armed Russia, in November Iran acknowledged the drones transfer, saying it took place before the war began.

Russia's vast oil reserves and trade ties with China and India have thus far largely cushioned it from Western sanctions.

Iran has struggled for years in the face of similar sanctions linked to its disputed nuclear program. Its currency fell to an all-time low late last year, further hobbling the economy, draining people's life savings and adding fuel to nationwide anti-government protests.

Efforts to revive the 2015 agreement, which lifted sanctions on Iran in return for strict limits and stepped-up surveillance of its nuclear activities, hit an impasse several months ago.