In addition to persistently backfiring, the Western sanctions have now opened the gates for Russia to partner with nations which are perceived as adversaries by the US and Europe. One such country is Iran whose economy is all set to boom with Russia’s support.
Iran and Russia have decided to link their banking systems. During the signing ceremony of this agreement, the deputy central bank governor, Mohsen Karami, stated that the banks in both nations had connected their messaging networks following agreements reached over the past year. Karami also noted that 100 banks in thirteen nations were connected to the network.
In the wake of Moscow’s military operation in Ukraine, the US and Europe barred Russian banks from the Belgium-based SWIFT financial messaging system. The SWIFT system regularly moves around billions of dollars in the world between 11,000 banks and financial institutions.
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Similarly, the West banned Iranian banks after it reimposed the sanctions on Tehran in the aftermath of the withdrawal of Washington from the JCPOA deal in 2018.
Barring banks from the SWIFT system has drastic repercussions on any nation’s economy. As it tremendously restricts an economy’s ability to acquire foreign capital and do international trade. The measure is one of the harshest in the sanctions regime.
How have sanctions brought Iran and Russia closer?
As aforementioned, following the start of Russia’s military operation in Ukraine, Biden, Macron and Leyen imposed strict sanctions on Moscow. The economic restrictions banned Russia from making debt payments using foreign currency held in US banks.
Key Russian banks were cut off from the international financial system, delaying payments to Moscow for its oil and gas exports. Russian firms got banned from borrowing money, limits were placed on deposits that Russians can make at banks and assets belonging to significant entities and business people associated with the Kremlin were frozen.
The US and Europe anticipated that their sanctions will have drastic consequences on Russia and will compel Putin to stop the operation to safeguard the sovereignty and territorial integrity of Moscow, but nothing of that sort happened.
However, the exact opposite happened. As the Russian economy grew exponentially, in fact, according to the Finnish Center for Research on Energy and Clean Air, Moscow earned around 93 billion euros from its energy exports.
While unemployment fell to its lowest level of 3.8% in Russia, annual inflation was down to 13.7%.
One of the positive implications of the West’s sanctions on Russia is that it brought it closer to nations which too are victims of the reprehensible aggressions and countless misdeeds of Biden, Macron and Leyen. One of these nations is Iran.
Like Moscow, Iran has been subjected to unprecedented levels of injustice and oppression at the hands of the US. In addition to persistently interfering in Tehran’s domestic politics, Washington has left no stone unturned to damage its economy.
Unlike Russia, the US sanctions had dire impacts on Iran’s economy. Iran’s economy shrank by an estimated 4.9% in 2020. Although the Middle Eastern nation enjoyed an unprecedented economic growth of 12.5% following the signing of the JCPOA deal. But the relief was short-lived.
As the US withdrew from the nuclear deal in 2018, it tightened its sanctions. This tremendously lowered Tehran’s ability to sell oil and averted it from receiving money from energy sales. Unfortunately, there are billions of dollars from Iran which are sitting in the banks of China and South Korea but Tehran cannot access them owing to sanctions.
In addition to declining oil exports, Iran’s industrial exports, which are a large source of revenue, also dropped.
Tehran’s future is bright
However, following the signing of the agreement between Russia and Iran to link their banking system, Tehran’s economy will certainly experience unprecedented growth.
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The alternative to the SWIFT messaging system, introduced by Russia, is growing at a record pace. In fact, as per the director of Russia’s central bank’s national payment system department, many entities had joined Russia’s alternative system, taking the total number to 440.
Therefore, the geopolitical experience has demonstrated that countries which defied the hegemonic presence of the US and Europe and embraced the integrity and magnanimity of Russia are doing much better. With the inking of this deal, one thing is crystal clear and that is Iran’s economy is slated to undergo a massive boom with the blessings of Putin.
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