Members of the Asian Clearing Union (ACU) — a group of nine powerful central banks including those of India, Pakistan and Iran — are set to launch a new cross-border financial messaging system in the coming weeks, as an alternative to the existing major international SWIFT network.
According to officials from Iran – which currently heads the body – members of the bloc agreed at a meeting in the Iranian capital, Tehran, on May 24 to establish the new regime within a month.
“the [ACU] In remarks carried by Iran’s state-owned Fars News Agency, Deputy Governor of the Central Bank of Iran Mohsen Karimi said that countries decided to have a system dedicated to themselves, keeping in mind that SWIFT is not available to all countries and given that it has its own costs. an agency.
This was a thinly veiled reference to the fact that Iranian banks are excluded from the SWIFT network due to international sanctions. It’s not the only country being banned – Russia and Belarus are also banned from using Swift.
These networks are vital facilitators of international trade because they allow banks to communicate accurately and securely with each other about money transfers and other instructions.
The latest ACU initiative mirrors what Iran is already doing on a bilateral basis with other countries.
In particular, diplomatic, military, and economic relations between Iran and Russia have strengthened since President Vladimir Putin’s invasion of Ukraine in February 2022, making Moscow even more isolated on the international stage. The two countries have been looking for ways to bypass the sanctions by, among other things, creating a new banking messaging system and reducing the use of US dollars in their bilateral trade.
It appears to have been working, as Russian Deputy Prime Minister Alexander Novak stated at a recent press conference in Tehran that 80% of Russian-Iranian trade is now done in their national currencies, the riyal and the ruble.
Their banks have also expanded. In mid-May, it emerged that VTB, Russia’s second largest bank, had opened an office in Tehran, becoming the first Russian bank to do so. On the other hand, Iranian officials said that two of their country’s banks are planning to open branches or offices in Russia.
Iran now wants to try to develop similar new financial arrangements with its other trading partners across Asia.
Speaking at the ACU meeting in Tehran, Central Bank of Iran Governor Mohammad Reza Farzin claimed dropping the dollar would help protect member states’ foreign exchange reserves while still enabling effective settlement of bilateral trade deals.
Farzin said the organization also plans to accept new members and diversify the range of currencies it adopts for payment settlements to help the de-dollarization campaign. The organization is currently focusing on trading using the dollar, euro and yen.
Belarus and Mauritius have both applied for ACU membership. Also notable is that earlier in the month, Farzin invited his Russian counterpart, Elvira Nabiullina, to an ACU summit.
Despite the difficulties caused by international sanctions, Iran continues to trade with about 150 countries around the world, with its most important trading partners including China, Iraq, Turkey and the United Arab Emirates.
Iran’s Economy Minister Ehsan Khandozi recently said that less than 10% of Iran’s international trade is now done using dollars, down from close to 30% two years ago.
Earlier this month, Iranian Vice President Mohammad Mokhber held a meeting in Tehran with Vietnamese Public Security Minister General Tu Lam in which he told his visitor that Iran is also keen to use national currencies in its trade with Hanoi, saying such a move would encourage more bilateral business. .