Russian President Vladimir Putin shakes hands with Ali Akbar Velayati, a top adviser to Iranian Ayatollah Ali Khamenei, during their meeting at the Novo-Ogaryovo state residence outside Moscow, Russia, July 12, 2018. Photo: Sputnik / Alexei Druzhinin / Kremlin via Reuters.

Iran and Russia have connected their interbank communication and transfer systems to help boost trade and financial transactions, a senior Iranian official said on Monday, as both Tehran and Moscow are chafing under Western sanctions.

Since the 2018 reimposition of US sanctions on Iran after Washington ditched Tehran’s 2015 nuclear deal with world powers, the Islamic Republic has been disconnected from the Belgium-based SWIFT financial messaging service, which is a key international banking access point.

Similar limitations have been slapped on some Russian banks since Moscow’s invasion of Ukraine last year.

“Iranian banks no longer need to use SWIFT … with Russian banks, which can be for the opening of Letters of Credit and transfers or warranties,” Deputy Governor of Iran‘s Central Bank, Mohsen Karimi, told the semi-official Fars news agency.

While Russia‘s central bank declined to comment on the deal signed on Sunday, Karimi said “about 700 Russian banks and 106 non-Russian banks from 13 different countries will be connected to this system”, without elaborating on the names of the foreign banks.

Iran‘s Central Bank chief Mohammad Farzin welcomed the move. “The financial channel between Iran and the world is being repaired,” he tweeted.

Since the start of the Ukraine war, Tehran and Moscow have acted to forge close bilateral ties as both capitals attempt to build new economic and diplomatic partnerships elsewhere.

With deepening economic misery, largely because of US sanctions over Tehran’s disputed nuclear work, many Iranians are feeling the pain of galloping inflation and rising joblessness.

Inflation has soared to over 50%, the highest level in decades. Youth unemployment remains high with more than 50% of Iranians being pushed below the poverty line, according to reports by Iran‘s Statistics Centre.

Facing their worst legitimacy crisis amid months of anti-government protests sparked by the death in custody of a young woman, Iranian authorities fear economic isolation and lack of economic improvement could lead to more unrest.

Iran‘s top authority, Supreme Leader Ali Khamenei, said on Monday that the establishment faced “a tangible welfare and livelihood problem” that could not be cured without economic growth.

“In today’s world, a country’s status is largely related to its economic power … We need economic growth to maintain our regional and global position,” Khamenei said in a televised speech.