VTB drives Russian banks expansion in Iran

VTB, Russia’s second-largest bank, has established a representative office in Iran, according to an Iranian official. This move comes as both Moscow and Tehran, constrained by Western sanctions, aim to enhance their trade and transaction capabilities. VTB, a state-owned bank, faced a significant loss of $7.7 billion last year due to targeted Western sanctions on Russia’s financial sector. Like other major Russian banks, VTB has been excluded from the SWIFT international financial messaging service.

Given that Russia’s ties with Iran have been disconnected from SWIFT since 2018, strengthening relations with Iran has become increasingly important for Moscow, particularly after dispatching troops to Ukraine in February 2022. In recent months, the two countries have already interconnected their interbank communication and transfer systems. Additionally, Iran has been planning to accept Russia’s Mir payment cards, which serve as an alternative to Visa and Mastercard.

Alireza Peymanpak, the head of Iran’s Trade Promotion Organization, stated that VTB is the only bank to have opened its representative office in Iran during a period when the number of foreign banks’ representative offices decreased from around 45 to 15. Peymanpak highlighted VTB’s active presence in Iran’s banking networks, especially in export destinations such as CIS countries, India, Vietnam, and notably China. VTB’s presence is expected to attract export earnings and reduce foreign transfer costs for Iran.

According to a source familiar with the Iranian banking market, VTB has already established correspondent accounts with Iranian banks. Despite VTB CEO Andrei Kostin’s previous discussion on cooperation during a meeting with Iran’s ambassador, the bank has not provided an immediate response to requests for comment. In the coming weeks, it is anticipated that Bank of Russia Governor Elvira Nabiullina may visit Iran to further strengthen financial ties, as stated by a separate source. However, the central bank has not yet commented on this matter.

While Sberbank, the dominant lender in Russia, has been in discussions to reinforce ties with Iran, it has not entered the Iranian market as of yet, according to another source. On the other hand, Promsvyazbank, another state-owned bank with a primary focus on the defense sector, is already present in Iran.