Iran’s state media reported on Wednesday that Iran and Russia have finalized an agreement to use their national currencies, the Iranian rial and the Russian ruble, in bilateral trade instead of the U.S. dollar. It said the deal was finalized during a meeting between the governors of the two countries ‘ central banks in Russia. Both nations are subject to sanctions from the United States.
The move away from the dollar is another sign of deepening ties between the longtime foes and underscores their shared interest in developing their economic counterweight to Western pressure. It also potentially reshapes global trade dynamics by shifting the balance of power between significant economies traditionally relying on the dollar to facilitate trade.
In a sign of the deepening cooperation between the two nations, Iran and Russia are set to speed up work on a “major new interstate agreement.” The announcement came days after President Vladimir Putin held five hours of talks in Tehran with Iranian President Ebrahim Raisi, who has sought to expand the Kremlin’s economic and political influence across the Middle East.
Russia and Iran have been expanding their trade ties as they seek to diversify their economies and decouple from the United States, which has imposed a range of punitive sanctions on the regime in Tehran. In November, Iran announced that it had finalized arrangements to buy several of Russia’s Su-35 fighter jets, Mi-28 attack helicopters, and Yak-130 pilot training aircraft.
Iran is keen to expand its military ties with Russia, particularly as it seeks to assert itself in the Middle East, where Israeli attacks have killed Hezbollah fighters and wounded civilians. The resumption of direct flights between Moscow and Tehran was widely seen as part of this effort.
On the economic front, Iran and Russia are working on a freight network of ship, rail, and road routes that will avoid the Suez Canal and enable them to bypass Western sanctions. The project, known as the International North-South Transportation Corridor (INSTC), would run between Rasht, a port in northern Iran, and the Astara border crossing on the border with Azerbaijan. Iran and Russia are members of the Russian-led Eurasian Economic Union, enabling them to boost trade within the bloc.
The INSTC and other projects reflect Iran’s strategic importance to Russia. The Kremlin views the country as a crucial counterweight to Western powers, and the relationship has gotten even closer since Moscow’s invasion of Ukraine last year led to heavy U.S. sanctions. In return for Moscow’s support, the Kremlin has provided Tehran with substantial economic, diplomatic, and military assistance. This includes a multi-billion-dollar gas deal and a wide range of military equipment. The two have also signed a free-trade agreement. The deal paves the way for Tehran to join other Eurasian economic alliances and deepen its ties with Russia.
