EghtesadOnline: Russia is looking to establish a regional payment network in the foreseeable future and Iran can become a member if it meets the technical requirements, the chief executive of Informatics Services Corporation said.
On Monday, ISC chief Aboutaleb Najafi discussed the issue of integrating the payment systems of Iran and Russia, and the reasons behind the delay in the much-anticipated scheme for several months. In doing so, he spoke of a much larger plan that could benefit Iran by sidelining the US dollar and combating sanctions.
Iran first announced in mid-May 2017 that it has reached an agreement with Russia to integrate their bank card systems, which would facilitate payments and boost tourism. The plan was originally slated for August 2017, but suffered from several delays.
Referring to the scheme, Najafi said Iranian bank cards are magnetic, whereas the Russians employ smart cards with chips, Financial Tribune reported.
For this reason, he explained, both sides agreed to first implement the scheme on a small scale to avoid a bigger risk and potential harm from counterfeiting and fraud, as its cards are less secure.
“Russians believe that since bank cards in Iran are magnetic and enjoy lower security compared to smart cards of Russia, in case of any counterfeiting or fraud, Iran will have to bear the cost of any damages,” the head of the entity affiliated with the Central Bank of Iran told IBENA.
Iran and Russia carried on with the plan, but decided to only implement it on ATMs in the first phase. This would mean that Iran’s bank cards would be used in Russian ATMs and Russian banks cards would get access to ATMs in Iran.
Najafi noted that preliminary tests were conducted successfully.
CBI officials had also previously announced that pilot transactions as part of the scheme showed agreeable degrees of success. The two sides repeatedly spoke of the plan as ongoing and set deadlines for its full implementation, the latest of which came from CBI Governor Valiollah Seif who mentioned Dec. 10, 2017, as the final date.
Change of Strategy
However, Najafi explained on Monday that “Russians announced a change of strategy in the past few months and are now following up on establishing a payment network that can cover all countries of the region”.
The official did not provide any details on the timeframe for completing the plan or what countries will become members of the network. But it stands to reason that members of the Commonwealth of Independent States would be considered as major participants in the network.
According to the ISC chief, “the Russians have obligated Iran to incorporate certain algorithms in the electronic banking system to implement this plan” and this has created conflicts of views between the two nations.
The Iranian official conceded that this problem has slowed the scheme’s progress, but said “it is still subject to negotiations”.
Najafi reassured that the Russian change of strategy has nothing to do with the US exit from the Joint Comprehensive Plan of Action, the formal name of Iran’s nuclear deal with world powers.
“This change happened months before the US exit from JCPOA, so Russia has made no changes to its position since the US withdrawal,” he said.
US President Donald Trump on May 8 went back on US commitments as part of the landmark deal and unilaterally reimposed sanctions against Iran.
If Russia is, indeed, mulling the creation of the regional network and Iran becomes a member, it could prove immensely helpful in implementing the two countries’ vision of sidelining dollar transactions and fighting off unilateral US sanctions.
ISC was established in 1993 as an executive arm for operating Iran’s comprehensive banking automation system that includes all the aforementioned systems.
In October 2017, ISC signed a deal with Russia’s Banking Production Center to develop a national platform to link international card payment systems with Iran’s. The deal is worth $11 million, ISC’s PR department said at the time.