Iran's First Vice President Announces 'Important' Banking Agreement with Syria

Eshaq Jahangiri, Iran's First Vice President, who is leading a governmental and business delegation to Syria, announced an 'important' banking agreement with the country. According to a Reuters report, Jahangiri also announced the commencement of construction of a power plant in the Latakia province of Syria, with the groundbreaking ceremony scheduled for Tuesday, January 29. The Reuters report did not mention details of the banking agreement, but the state news agency IRNA quoted Abdolnaser Hemmati, the Governor of the Central Bank, who accompanied Jahangiri to Damascus, stating: 'According to the agreement, the central banks and other banks of the two countries will communicate through a financial messaging system. Financial transactions will be conducted based on the national currencies of the two countries, as well as other currencies, excluding the dollar.' He did not clarify how the 'financial messaging system' would operate, but according to IRNA, Jahangiri mentioned in a meeting with Syrian Prime Minister Imad Khamis that 'one of the most important issues is the banking system and the direct connection of the banks of the two countries with a system outside of the SWIFT network.' SWIFT is the most important international money transfer network, which cut services to the Central Bank and several banks of the Islamic Republic in November, coinciding with the onset of U.S. financial sanctions against Iran. During Jahangiri's visit to Damascus, which included representatives from the Chamber of Commerce, the two countries signed a memorandum of cooperation in various fields, including 'combating money laundering and financing terrorism, housing construction and public services, rail cooperation, encouraging investment, and comprehensive long-term strategic cooperation.' Economist Arash Azarmi commented on the banking agreement between Iran and Syria, stating that 'the sanctions on Iran's banking system are multifaceted, with perhaps the most significant being the issue of SWIFT, which facilitates financial messaging. This means establishing communication between two banks in different countries using a standard international language. The discussion of local financial messaging systems has been raised for several years. For example, Russia, due to the sanctions imposed by the U.S., has created its own local financial messaging system. Specifically, Russia and China have sought to establish financial relations as the head of the Central Bank of Iran mentioned. That is, Russian and Chinese banks exchange using this messaging system and non-dollar currencies. However, all of this is still in its infancy and does not seem to be operational yet. In trade relations between Iran and Russia, discussions have been ongoing for seven to eight months to conduct banking relations between the two countries using the local financial messaging system of Russia, and it has been reported that agreements have been made between the central banks of the two countries, but nothing has happened yet. Iran and Syria's trade relations have also been very limited, at less than $200 million annually. The head of the joint economic committee between Iran and Syria, who was part of this delegation with Jahangiri, indicated that the establishment of a local financial messaging system is currently theoretical, as he also mentioned that in the first phase, cooperation will focus on currency exchanges, meaning that currency exchanges will play a key role in money transfers, and it remains to be seen how capable Syrian banks will be after several years of war and its consequences to engage in such cooperation in Iran's specific situation and its sanctions conditions.' Jahangiri stated that Iran is ready to undertake 'serious and important work' in various fields in Syria, emphasizing that Iran is one of the 'most capable countries in the region and the world' in the field of power plant construction and can be a reliable partner for Syria in this regard. The groundbreaking for the Latakia power plant will take place on Tuesday. The memorandum for the construction of this 540-megawatt power plant, valued at 411 million euros, was signed on October 1 of this year in the presence of the energy ministers of Iran and Syria. The Iranian 'Power Plant Projects Management' group (MAPNA) will establish this power plant. According to IRNA, the Prime Minister of Syria stated in a meeting with Jahangiri: 'According to the emphasis of Bashar al-Assad, the President of Syria, the priority for implementing reconstruction projects belongs to Iranian companies. We need to develop power plants to supply 500 to 800 megawatts of electricity annually. Iran can play a significant role in this area.' The construction of the power plant in Syria comes at a time when, according to statistics from the Ministry of Energy, Iran has only managed to complete 1,463 megawatts of power plants in the country by the end of January this year, while it was planned to launch over 6,000 megawatts of power plants this year. Last year, Iran also achieved only half of its new power plant construction goals and faced electricity shortages and outages this summer. Jahangiri also emphasized the reconstruction of road and rail transport infrastructure in Syria, stating that Iran is ready to establish a joint railway line under a bilateral agreement between Syria and Iran, and also to strengthen trade flows between the two countries by connecting the Persian Gulf to the Mediterranean Sea. The First Vice President also stated that Iran is ready for educational and technical cooperation in the exploration and exploitation of Syria's oil and gas resources, as well as to meet the country's pharmaceutical needs. This month, the U.S. State Department's special action group on Iran released a report stating that the Islamic Republic has spent $16 billion since 2012 to support Bashar al-Assad and its allied groups in Yemen and Iraq. Bloomberg reported in 2015 that Tehran spends about $6 billion annually to support Assad's government, and in some cases, this assistance has reached up to $15 billion. In recent years, Iran has provided significant financial assistance to Syria, including the establishment of two credit lines of $1 billion and $3.6 billion for exporting goods to the country. Previously, Yahya Rahim Safavi, a senior military advisor to the Supreme Leader of the Islamic Republic, stated in a speech that Iran should recover the costs incurred in Syria through 'oil, gas, and phosphate mines' in the country.