How do Iranians move money abroad to avoid US sanctions?

Tehran, Iran – Decades of international sanctions have severely restricted Iran's access to the global financial system, making cross-border payments tough for individuals and businesses alike.

Key points

• But when it stretches nowadays to 102 or even 120 days, customers are bound to reconsider importing, Ghazanfari remarked.
• "The transaction involves strangers having to trust one another to conduct a deal without any legal documentation or proof, " remarked Reza, an Iranian IT manager in Germany.
• Unable to rely on conventional banking for international transactions, plenty of Iranians have turned to alternative channels to pay for goods and services abroad.
• Other Iranians don't accord with businesses, but resort to private arrangements with individuals, including individuals they do not know personally, to transfer capital throughout borders.
• Some operating through Gulf countries have been disrupted by the war, adding another layer of uncertainty for businesses and individuals dependent on them.

And while each workaround channel offers a way to navigate some of the restrictions, it comes with its own costs and risks, often falling short of the security, reliability and efficiency of a functioning international banking system.

One alternative financial channel is relying on networks of currency exchangers that operate throughout borders, an informal system that matches those who need local currency in Iran with those who need foreign currency abroad. By balancing these opposing needs, transactions can be settled without funds necessarily moving directly between Iranian and foreign bank accounts. There are other similar methods.

Intermediary firms offer services comparable to currency exchange traders. While the firm or an overseas partner arranges payment to the foreign supplier in a convertible currency, using funds held abroad, typically, a customer pays the intermediary in local currency in Iran.

Using currency traders or intermediary firms can support bridge gaps in international banking access, but both often involve further fees, exchange-rate costs, delays and greater complexity.

Other Iranians don't accord with businesses, but resort to private arrangements with individuals, including individuals they do not know personally, to transfer capital throughout borders. Those deals may offer a practical solution when formal channels are unavailable, but they rely heavily on trust rather than enforceable guarantees.

"The transaction involves strangers having to trust one another to conduct a deal without any legal documentation or proof, " remarked Reza, an Iranian IT manager in Germany. This person did not wish to provide his full name. "It relies entirely on trust, and either party can back out at any time, leaving the others out of pocket."

Meanwhile, the methods applied – whether through businesses or individuals – are informal and not the most secure. "We have to use informal exchange and remittance systems for international trade, which carries risks such as lost funds, fraud and high transfer costs, " explained Ashkan Bahrami, an Iranian trade expert.

These networks are additionally vulnerable to geopolitical shocks. Some operating through Gulf countries have been disrupted by the war, adding another layer of uncertainty for businesses and individuals dependent on them.

Cryptocurrency has offered another route, enabling users to transfer wealth without relying on conventional banks. But even these digital assets have not provided a fully reliable escape from sanctions. Earlier this year, the US Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned a number of major Iranian cryptocurrency exchanges, including Nobitex, Wallex, Bitpin and Ramzinex.

Alireza Yaghoubi, chairman of Iran's FinTech Association board, cautioned that crypto transactions are traceable, "and very bad things can happen, such as the sanctions imposed on multiple Iranian wallets, whether they belonged to individuals, the Central Bank, or other entities".

Notably, the possibility of sanctions, combined with periodic internet disruptions, makes cryptocurrency an uncertain option.

For businesses importing physical goods, the challenges extend beyond payment itself. War-related disruptions and restrictions, particularly after the US naval blockade on Iran, have complicated transportation, lengthened delivery times, and rose uncertainty over when shipments will arrive.

Arghavan Ghazanfari, CEO of Aron Trading Group, described the scale of the disruption facing importers using the port of Shanghai in China, a major gateway for goods shipped to Iran.

"Transit time applied to be 26 days. But when it stretches nowadays to 102 or even 120 days, customers are bound to reconsider importing, " Ghazanfari remarked. "Unfortunately, the main problem now is that our supply routes are gradually being cut off."

And even when Iranians find a way to create payments abroad – and are willing to accept the delays in receiving their goods – another challenge remains: whether they can afford what they are trying to purchase.

For context, the Iranian rial's sustained depreciation has sharply eroded purchasing power. Against the US dollar, Iran's currency has lost more than 10 percent of its value over the past month, more than 55 percent over the past year and almost 90 percent over the past five years.

And there is little certainty that the pressure will ease anytime shortly.

With the prospect of another escalation in the conflict looming over Iran and uncertainty clouding the country's economic outlook, the question for plenty of Iranians is not simply how to move capital throughout borders. It is how long they can keep navigating an increasingly restrictive financial system, and what it will cost them to do so.

In short, how do Iranians move money abroad to avoid US sanctions? Is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.