Russian State-Owned VTB Bank to Open Branch in Iran

Russian state-owned VTB Bank plans to upgrade its representative office in Iran to a full branch by the end of 2025.

“Our plan is that initially, the branch will offer international trade services to Russian and Iranian companies, as well as bank products and settlement mechanisms sought after in Iran. These are chiefly settlements in national currencies and trade and export finance,” the bank’s press service told Russia’s Interfax news agency on January 18.

On January 17, the bank’s chief, Andrey Kostin, announced plans to expand VTB’s presence in Iran, stating: “It will become the first branch of a Russian bank in Iran and help reduce the cost and risks of carrying out international settlements and broaden possibilities for both countries’ participants in international trade in using trade and export finance instruments.”

The branch’s opening is contingent upon approval from Iran’s financial regulator, which VTB hopes to obtain by the end of the year. According to the report, the decision has already received in-principle agreement from Russia’s Central Bank.

The structure and staffing of the branch will align with business needs and Iranian legal requirements. VTB intends to hire an international team, including Russian and Iranian specialists, to operate the branch.

This announcement follows the signing of the Comprehensive Strategic Partnership Agreement between Iran and Russia in Moscow on January 17. The agreement outlines a 20-year roadmap for cooperation and is expected to significantly enhance economic ties between the two nations.

VTB established its representative office in Tehran in 2023 as part of efforts by Iran and Russia to strengthen their relations and counter foreign sanctions targeting their economies. Both nations’ banking systems are under Western sanctions. The sanctions have caused Iran’s currency system to fragment into formal and informal sectors, as many exporters resist selling their foreign exchange earnings at the lower official rates imposed by the state.

At a press conference on January 17, Russian President Vladimir Putin remarked that Russia and Iran have “almost completely switched to national currencies in mutual settlements” and are working to integrate their national payment systems.

According to Putin, over 95% of bilateral trade operations in 2024 were conducted in Russian rubles and Iranian rials.

“Russia and Iran are important partners for each other in trade, finance, and investment,” he added.

Putin also noted that, in December 2024, the Supreme Eurasian Economic Council granted Iran observer status in the Eurasian Economic Union (EAEU). He expressed optimism that the anticipated enforcement of a free trade agreement between Iran and the EAEU would further expand bilateral commercial ties.

Following the agreement’s signing, Mohammad Reza Farzin, governor of the Central Bank of Iran, announced during a Moscow press conference that the Iran-Russia currency agreement is now operational. He highlighted the integration of the MIR and SHETAB payment networks, which began in November 2024, enabling low-volume transactions, such as those for tourism. Farzin added that the linkage between Iran’s SEPAM and Russia’s SPFS systems, facilitating high-volume transactions in foreign trade, is also in place.

In 2024, the two countries integrated their debit card systems, according to the Central Bank of Iran. This followed a significant 2023 agreement between their central banks to establish banking ties, as both are disconnected from international interbank messaging systems like SWIFT. Earlier in 2023, VTB announced plans to expand operations in free trade zones, including Amirabad port and Kish Island in the Persian Gulf.

The effectiveness of these measures will depend on the scale of Iran-Russia trade. Balanced trade is critical to avoiding market instability. Trade imbalances could strain currency reserves and destabilize exchange rates, particularly given the significant devaluation of the Iranian rial against the U.S. dollar.