by Pepe Escobar, first posted at the Cradle, posted with the author’s permission
News of Russian banks connecting to Iran’s financial messaging system strengthens the resistance against US-imposed sanctions on both countries and accelerates global de-dollarization.
The agreement between the Central Banks of Russia and Iran formally signed on 29 January connecting their interbank transfer systems is a game-changer in more ways than one.
Technically, from now on 52 Iranian banks already using SEPAM, Iran’s interbank telecom system, are connecting with 106 banks using SPFS, Russia’s equivalent to the western banking messaging system SWIFT.
Less than a week before the deal, State Duma Chairman Vyachslav Volodin was in Tehran overseeing the last-minute details, part of a meeting of the Russia-Iran Inter-Parliamentary Commission on Cooperation: he was adamant both nations should quickly increase trade in their own currencies.
Confirming that the share of ruble and rial in mutual settlements already exceeds 60 percent, Volodin ratified the success of “joint use of the Mir and Shetab national payment systems.” Not only does this bypass western sanctions, but it is able to “solve issues related to mutually beneficial cooperation, and increasing trade.”
It is quite possible that the ruble will eventually become the main currency in bilateral trade, according to Iran’s ambassador in Moscow, Kazem Jalali: “Now more than 40 percent of trade between our countries is in rubles.”
Jalali also confirmed, crucially, that Tehran is in favor of the ruble as the main currency in all regional integration mechanisms. He was referring particularly to the Russian-led Eurasian Economic Union (EAEU), with which Iran is clinching a free trade deal.
The SEPAM-SPFS agreement starts with a pilot program supervised by Iran’s Shahr Bank and Russia’s VTB Bank. Other lenders will step in once the pilot program gets rid of any possible bugs.
The key advantage is that SEPAM and SPFS are immune to the US and western sanctions ruthlessly imposed on Tehran and Moscow. Once the full deal is up and running, all Iranian and Russian banks can be interconnected.
It is no wonder the Global South is paying very close attention. This is likely to become a landmark case in bypassing Belgium-based SWIFT – which is essentially controlled by Washington, and on a minor scale, the EU. The success of SEPAM-SPFS will certainly encourage other bilateral or even multilateral deals between states.
It’s all about the INSTC
The Central Banks of Iran and Russia are also working to establish a stable coin for foreign trade, replacing the US dollar, the ruble, and the rial. This would be a digital currency backed by gold, to be used mostly in the Special Economic Zone (SEZ) of Astrakhan, in the Caspian Sea, already very busy moving plenty of Iranian cargo.
Astrakhan happens to be the key Russian hub of the International North-South Transportation Corridor (INSTC), a vast network of ship, rail, and road routes which will drastically increase trade from Russia – but also parts of Europe – across Iran to West Asia and South Asia, and vice-versa.
And that reflects the full geoconomic dimension of the SEPAM-SPFS deal. The Russian Central Bank moved early to set up SPFS in 2014, when Washington began threatening Moscow with expulsion from SWIFT. Merging it with the Iranian SEPAM opens up a whole new horizon, especially given Iran’s ratification as a full member of the Shanghai Cooperation Organization (SCO), and now a leading candidate to join the extended BRICS+ club.
Already three months before the SEPAM-SPFS agreement, the Russian Trade Representative in Iran, Rustam Zhiganshin, was hinting that the decision “to create an analog of the SWIFT system” was a done deal.
Tehran had been preparing the infrastructure to join Russia’s Mir payment system since last summer. But after Moscow was hit with extremely harsh western sanctions and Russian banks were cut off from SWIFT, Tehran and Moscow decided, strategically, to focus on creating their own non-SWIFT for cross-border payments.
All that relates to the immensely strategic geoeconomic role of the INSTC, which is a much cheaper and faster trade corridor than the old Suez Canal route.
Russia is Iran’s largest foreign investor
Moreover, Russia has become Iran’s largest foreign investor, according to Iranian Deputy Finance Minister Ali Fekri: this includes “$2.7 billion worth of investment to two petroleum projects in Iran’s western province of Ilam in the past 15 months.” That’s about 45 percent of the total foreign investment in Iran over the October 2021 – January 2023 period.
Of course the whole process is in its initial stages – as Russia-Iran bilateral trade amounts to only US$3 billion annually. But a boom is inevitable, due to the accumulated effect of SEPAM-SPFS, INSTC, and EAEU interactions, and especially further moves to develop Iran’s energy capacity, logistics, and transport networks, via the INSTC.
Russian projects in Iran are multi-faceted: energy, railways, auto manufacturing, and agriculture. In parallel, Iran supplies Russia with food and automotive products.
Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, is fond of reminding anyone that Russia and Iran “play complementary roles in global energy and cargo transit.” The Iran-EAEU free agreement (FTA) is nearly finalized – including zero tariffs for over 7,500 commodities.
In 2022, the EAEU traded more than $800 billion worth of goods. Iran’s full access to the EAEU will be inestimable in terms of providing a market gateway to large swathes of Eurasia – and bypassing US sanctions as a sweet perk. A realistic projection is that Tehran can expect $15 billion annual trade with the five members of the EAEU in five years, as soon as Iran becomes the sixth member.
The legacy of Samarkand
Everything we are tracking now is in many ways a direct consequence of the SCO summit in Samarkand last September, when Russian President Vladimir Putin and his Chinese counterpart Xi Jinping, in person, placed their bet on strengthening the multipolar world as Iran signed a memorandum to join the SCO.
Putin’s private talks with Iranian President Ebrahim Raisi in Samarkand were all about deep strategy.
The INSTC is absolutely crucial in this overall equation. Both Russia and Iran are investing at least $25 billion to boost its capabilities.
Ships sailing the Don and Volga Rivers have always traded energy and agricultural commodities. Now Iran’s Maritime News Agency has confirmed that Russia will grant their ships the right of passage along the inland waterways on the Don and Volga.
Meanwhile, Iran is already established as the third largest importer of Russian grain. From now on, trade on turbines, polymers, medical supplies, and automotive parts will be on a roll.
Tehran and Moscow have signed a contract to build a large cargo vessel for Iran to be used at the Caspian port of Solyanka. And RZD logistics, a subsidiary of Russian railway RZD, operates container cargo trains regularly from Moscow to Iran. The Russian Journal for Economics predicts that just the freight traffic on INTSC could reach 25 million tons by 2030 – no less than a 20-fold increase compared to 2022.
Inside Iran, new terminals are nearly ready for cargo to be rolled off ships to railroads crisscrossing the country from the Caspian to the Persian Gulf. Sergey Katrin, head of Russia’s Chamber of Commerce and Industry, is confident that once the FTA with the EAEU is on, bilateral trade can soon reach $40 billion a year.
Tehran’s plans are extremely ambitious, inserted in an “Eastern Axis” framework that privileges regional states Russia, China, India, and Central Asia.
Geostrategically and geoeconomically, that implies a seamless interconnection of INSTC, EAEU, SCO, and BRICS+. And all of this is coordinated by the one Quad that really matters: Russia, China, India, and Iran.
Of course there will be problems. The intractable Armenia-Azerbaijan conflict might be able to derail the INSTC: but note that Russia-Iran connections via the Caspian can easily bypass Baku if the need arises.
BRICS+ will cement the dollar’s descent
Apart from Russia and Iran, Russia and China have also been trying to interface their banking messaging systems for years now. The Chinese CBIBPS (Cross-Border Inter-Bank Payments System) is considered top class. The problem is that Washington has directly threatened to expel Chinese banks from SWIFT if they interconnect with Russian banks.
The success of SEPAM-SPFS may allow Beijing to go for broke – especially now, after the extremely harsh semiconductor war and the appalling balloon farce. In terms of sovereignty, it is clear that China will not accept US restrictions on how to move its own funds.
In parallel, the BRICS in 2023 will delve deeper into developing their mutual financial payments system and their own reserve currency. There are no less than 13 confirmed candidates eager to join BRICS+ – including Asian middle powers like Iran, Saudi Arabia, and Indonesia.
All eyes will be on whether – and how – the $30 trillion-plus indebted US will threaten to expel BRICS+ from SWIFT.
It’s enlightening to remember that Russia’s debt to GDP ratio stands at only 17 percent. China’s is 77 percent. The current BRICS without Russia are at 78 percent. BRICS+ including Russia may average only 55 percent. Strong productivity ahead will come from a BRICS+ supported by a gold and/or commodities-backed currency and a different payment system that bypasses the US dollar. Strong productivity definitely will not come from the collective west whose economies are entering recessionary times.
Amid so many intertwined developments, and so many challenges, one thing is certain. The SEPAM-SPFS deal between Russia and Iran may be just the first sign of the tectonic plates movement in global banking and payment systems.
Welcome to one, two, one thousand payment messaging systems. And welcome to their unification in a global network. Of course that will take time. But this high-speed financial train has already left the station.
Always good to read Pepe’s progress reports from Eurasia, with its positive spin in the economic realm.. There is life outside the dire 404 quagmire!
On a similar note, Brazil and Argentina are developing the same currency exchanges and hopefully showing Latin & South Americans how it can be done..
Venezuela just announced national currency trading with RF. So yes expect more global south to switch onto it.
Some videos for today.
Legendary journalist Seymour Hersh: US carried out Nord Stream pipeline attacks:
RT follows crew of Russian heavy flamethrower system:
Russian troops use heavy-caliber mortars as they advance on Kiev regime positions (another RT front line report):
Turkish volunteers train to fight against the Kiev regime:
Russian Ka-52 destroys Kiev regime tank with guided missile:
Russian Uragan MLRS pounds enemy position:
Russian Tornado-S MLRS fires at enemy:
Russian Nona self-propelled mortar pounds enemy:
Russian ATGMs pounding the enemy:
VDV troops fire upon and storm enemy positions:
Russian marines assault Kiev-occupied settlement:
Russian Su-25s conduct airstrike:
Azov Banderite confesses to murdering Donbass civilian:
Russian Msta-B howitzer fires on enemy fortified position:
For a very brief moment the US enjoyed unprecedented global power. Instead of nurturing that power, they misused and abused it. Small wonder the world has/is taking steps to sidestep that power. More strength to their arm!
Who’s the regional power now, Barack (yes-we-can-but-we-won’t) Obama? You might ask yourself that as you sink into your well deserved historical footnote.
“The problem is that Washington has directly threatened to expel Chinese banks from SWIFT if they interconnect with Russian banks.”
I look forward to the day that China tells the uS : one more threat of sanction & ALL trade with you Stops ! The uS would collapse ina very short time as they depend on China for just about everything! So (removed language,MOD) them.
Greeting from Tehran. Thank you Mr. Escobar for all the good news you are giving us. Another very important aspect of the EAEU-Iran cooperation beside all the other developments mentioned, would be in the field of an entirely Eurasian-run Gas Opec by Russia-Iran plus the other Central Asian gas giants followed by – certainly – Qatar at a later stage. One just can imagine what foremost impact it’s going to have on the global economy and the Petrodollar system. Now it’s evident that the former Polish-American megalomaniac-turned-think-tank, grand chessboard, Zbigniew Kazimierz Brzeziński wasn’t that stupid after all. The Neocons team members Nuland, Biden, Sunak, Von der Laden, Sean Penn, Klaus Schwab ….might as well look for another scheme of entertaining the global audience from their current role as the self-styled global financier and police officer.
In that ongoing nightmare that is a loss of Geo-political and Geo-economic dominance wherein they have nothing to counter the BeiJing One Belt Road World Economic Trade Global Project, with the powerhouse economies of Russia and The Global South signing on, The Washington Masters of Present Arrangements will no longer be kicking their geo-political can of legitimate external competitive challenges, in their universe read “threats”, down that metaphorical foreign policy road, their road to nowhere.
They now flag with recent visibly standout events – Nord Stream – that The American Power Elite will break and destroy not just the principles on which their globalized economic order rested but also any foreign physical infrastructure and countries to retain their presumed leading position, always fraudulently pitched as a force for good in the world while simultaneously emphasizing American interest – their interests.
Nord Stream features as hardly the beginning. The breaking of other people’s toys . . .
Thank you, Pepe. Highly encouraging.
May I make a small suggestion? That whenever we write of “western sanctions” we precede that term with “unprovoked”?
Thus “western sanctions ruthlessly imposed on Tehran and Moscow” becomes “unprovoked western sanctions ruthlessly imposed on Tehran and Moscow”.
and “Moscow was hit with extremely harsh western sanctions” becomes “Moscow was hit with extremely harsh unprovoked western sanctions”.
Petty, I know. But the sort of thing that will get up neocon noses!
One of the greatest revelations I ever saw about fiat currency is in the movie, Dumb and Dumber, where they replaced all the fiat currency with IOUs.
They thought their IOUs were good. It was funny as hell. Even Fiat currency is like IOUs, but they have to make us believers.
All I can say is, let’s keep it up with the red balloons.
Goldfinger- 99 Red Balloons (lyrics)
And let’s hope they don’t mistake those balloons for nukes.
If there’s something more precious than gold, it’s probably more precious than fiat currency, IOUs and Treasury Bonds.
1Pe 1:6 Wherein ye greatly rejoice, though now for a season, if need be, ye are in heaviness through manifold temptations:
1Pe 1:7 That the trial of your faith, being much more precious than of gold that perisheth, though it be tried with fire, might be found unto praise and honour and glory at the appearing of Jesus Christ:
Thanks for Pepe’s reporting and the Saker for posting it regularly. I will miss this site.
Obrigado, Pepe, as always.
Financial, trade, and transportation are some of the unfolding vectors between Iran and Russia, all interconnected in the “jigsaw” of the “War of the Economic Corridors,” to use your terminology.
No doubt Russia/Iran are becoming a powerful economic block, to the anger of the Collective West, in turn they are creating revolutionary financial systems to bypass the sanctions, which the CW can put where the sun doesn’t shine.
One more crucial vector in their relations is the synchronization of their electric networks.
As per “Rhythms of Eurasia,”
The North-South Corridor and the EAEU-Iran FTA are the backbone of the Pan-Eurasian partnership
“…However, the North-South corridor also has an electric power dimension. In more detail, since the second half of the 2010s, Russia, the Transcaucasian countries and Iran have been implementing the project of an electric power “bridge” aimed at maximizing the demand for electricity in these countries through bilateral or collective electricity supplies within the specified electric corridor.
At least half of the equipment for this project is provided by the Russian side; within the framework of the project, it is also produced through technological cooperation of the same countries. We also note that this electric corridor is planned to be extended in the future to Iraq and from there to Syria. In addition, the unified technological regime now covers up to a third of the total capacity of the electrical systems of Iran and Iraq.
This project is being implemented in stages, and very significant results in this process have been identified so far. Iranian Energy Minister Ali Akbar Mehrabian told the media at the end of November this year that” preliminary synchronization of the modes of operation of the electric networks of Russia and Iran has already been completed ” (meaning a single technological mode of operation of electric systems. The minister specified that ” technical measures will be implemented in the near future for the general synchronization of the electric networks of Iran, Armenia, Azerbaijan and Russia.” In addition, according to Mr. Mehrabian, ” the issue of electricity barter (exchange of electricity supplies) is being discussed in detail. – Ed.) with neighboring countries.”
In this regard, it should be noted that so far this is the only major project that Armenia and Azerbaijan are involved in, although today their relations, as they say, leave much to be desired. At the same time, the project is beneficial for these countries, because the continued growth of demand for electricity in Iran will allow not only Russia, but also Armenia and Azerbaijan to increase electricity supplies to the Iranian energy system (and in the future – to Iraq and Syria).
Thus, the Russia–Transcaucasia–Iran electric power corridor, along with its obvious sectoral and multilateral benefits, also has a foreign policy significance. As it helps to reduce the degree of tension between Baku and Yerevan.
In short, Iran’s increasingly active cooperation with Russia and the EAEU in general is shaping a comprehensive system of multilateral economic and, consequently, political partnership in Eurasia.
The electric power corridor is one more economic corridor added to the jigsaw, turning the relationship Russia/Iran into a powerhouse, literally, expanding the network from the Russian soft underbelly to Syria and Iraq.
In five to ten years, Russia and Iran would have broken out of the sanctions net the CW has created to trap, stagnate, and break their potential, as Eurasia’s economy expands a thousandfold, becoming the cradle of a new era for humanity, the cornerstone of the multipolar world.
The monkey in the room not mentioned is china with almost US$1 trillion in Monopoly money TBills. Dump that and the whole US economy crashes immediately.
US$1 trillion is not a life and death for China. Just look up how much is China’s annual GDP.
China has no desire the crash the US economy, because it still has significant sales for its consumer durables to the US and EU. It is, however, gradually weaning itself from using US dollars aka federal reserve notes, for international trade and by selling their reserves of T Bills to whomever will buy them. T-Bills must be purchased with US dollars. The Federal Reserve has in fact purchased $8 trillion of T-Bills using Federal Reserve Notes it created ex nihilo on its computer without incurring debt to anyone.This has injected $8 trillion in US dollars into the US economy resulting in inflation of the US currency, that translates into higher prices and an increase in the cost of consumer prices, driving down the average person’s standard of living.
You wrote “It’s enlightening to remember that Russia’s debt to GDP ratio stands at only 17 percent. China’s is 77 percent.”
China has no external debt in foreign currencies, it is in fact now the world’s largest creditor nation. China creates its domestic currency, the yuan, using its government owned central bank without incurring debt to anyone. This enables the Chinese government to fund government spending at will, to create infrastructure limited only by the ability of its workforce to do the work and the supply of energy needed for manufacture that it can now buy from Russia.
Both government owned and private banks in China are not allowed to CREATE money ex nihilo, they must BORROW money directly or indirectly at interest from their Central Bank. Thus this is money owed by China to itself, and therefore if there are loan defaults, it is of minor consequence, since it can easily be written off.
This is why China is in the US gunsights, because it challenges the privately owned US central bank, the Federal Reserve and the central bank of the EU, that is also indirectly privately owned by the same banking cabal.