Iran considers joining Russian financial messaging system to bypass Swift

Russia has been developing its own financial messaging system after some of its banks were blocked from Swift

In early March, the EU confirmed that it was excluding seven Russian banks from the Swift system. Bloomberg
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Iran is considering joining Russia's financial messaging system to bypass the Swift interbank system, after a number of Russian banks were cut off from the international payment messaging platform as part of western sanctions imposed on Moscow following its invasion of Ukraine.

Russia's Financial Message Transfer System (SPFS) was created to counter the risks of a disconnection of Russian banks from Swift, and talks are now under way to integrate Iran into the system, Moscow state-run news agency RIA Novosti reported on Thursday.

Iran was blocked from Swift in 2012 as part of measures aimed at containing its nuclear programme.

“We are making efforts in this direction (connecting Iranian banks to the SPFS) [for] the future,” Kazem Jalali, Iran's ambassador to Russia, was quoted by the agency as saying.

On February 26, the US, along with the European Commission, France, Germany, Italy, the UK and Canada, said they would bar certain Russian lenders from the Swift payments network to “ensure that these banks are disconnected from the international financial system and to harm their ability to operate globally”.

In a joint statement, they also pledged “restrictive measures that will prevent the Russian central bank from deploying its international reserves in ways that undermine the impact of our sanctions".

Blocking Russian banks would affect trade and make it harder for Russian companies to do business, officials said at the time.

In early March, the EU confirmed that it was excluding seven Russian banks from the Swift system including VTB, Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank and VEB.

As a global payments network, Swift handles more than five billion financial messages a year, supporting fast and secure cross-border payments, and is the principal mechanism for financing international trade. It serves as a lifeline to some of the world’s biggest financial institutions.

Russia's SPFS has yet to pick up traction internationally but it has seen domestic uptake, S&P Global Platts said.

“Introduced in response to the first threat of a Swift ban for Russia, usage of the system has grown domestically but has not yet been widely adopted internationally,” it said.

Updated: March 24, 2022, 12:29 PM