What would BRICS Bank membership mean for Iran's reeling economy?

Iranian Central Bank Governor Abdolnasser Hemmati said the country will soon join the BRICS development bank as he traveled to India this week for a meeting of the group’s finance leaders.

The news arrives as Iran is signaling that it wants a bigger financial lifeline from the BRICS bloc of emerging nations as the Islamic Republic’s wartime economy comes under mounting pressure from the war with the United States. 

What happened: Hemmati said on Wednesday that Iran would soon become a member of the New Development Bank, which is often referred to as the BRICS Bank. The bank itself has not confirmed that Iran’s membership is imminent. 

Tehran has long pursued NDB membership. In 2024, the year Iran joined the bloc, Central Bank Governor Mohammad-Reza Farzin said that Iran planned to join the bank. 

The multilateral lender was established in 2015 by Brazil, Russia, India, China and South Africa to finance infrastructure and sustainable-development projects in emerging markets. It has since expanded its membership to include Bangladesh, the United Arab Emirates, Egypt, Algeria and Uzbekistan. The bank launched with $100 billion in authorized capital and finances projects ranging from energy and transport to digital and social infrastructure.

Hemmati’s NDB announcement came as he attended the Aug. 11-12 BRICS finance meeting in Jaipur, where he called for the bloc to turn its financial cooperation into practical mechanisms, per Iranian news reports. “BRICS will have the greatest impact when it can turn policy dialogues into practical initiatives and operational mechanisms,” Hemmati said in a statement carried by Tasnim News Agency.

The governor also noted that Iran has maintained active participation in BRICS working groups on cross-border payments, national currencies and financial technology since joining the group. The official also said Tehran is pursuing bilateral and trilateral monetary arrangements with other BRICS members and supports connecting national payment systems to make trade less dependent on outside financial channels.

Why it matters: For Iran, the appeal of NDB memberships is obvious, as Tehran has long seen BRICS membership as an opportunity to circumvent sanctions and economic isolation. For years Tehran has sought to reduce its reliance on the dollar, including through agreements with Russia and efforts to expand the use of national currencies in trade. 

The US-Iran war has demonstrated how the regime is increasingly turning to new avenues to bypass financial restrictions, including by attempting to charge Strait of Hormuz shipping tolls in cryptocurrency. In recent months, the US government has increasingly targeted Iran’s financial workarounds with sanctions targeting digital cryptocurrency flows. 

Amid new wartime strains, Iran’s push to join the NDB can be understood as both a practical and a political signal. Although peace talks with the United States have included sanctions relief and the prospect of unlocking billions in frozen funds alongside a potential $300 billion reconstruction fund, Tehran can hardly afford to stop cultivating financial channels outside the reach of US sanctions as part of a broader shift toward a less dollar-dependent global financial system.

Even if Iran’s membership bid is formally confirmed, support from the BRICS Bank won't transform Iran’s economic fortunes. As a development lender, NDB isn’t capable of addressing the enormous costs of a war-damaged economy. The lender’s $100 billion in authorized capital is significant, but the scale of Iran’s financing needs is vastly larger. Earlier in the war, estimates placed Iran’s wartime infrastructure damage at about $270 billion — a figure that is presumably higher now. 

There are also questions about what the NDB can actually deliver. Egypt joined the bank in 2023 amid efforts to diversify partnerships, which came as the heavily indebted country’s economy was mired in a crippling crisis. Currently, however, the North African nation has no active NDB-backed projects listed on the institution’s website. More recently, Cairo has turned back to the International Monetary Fund and other Western partners for major financial support.

Tehran, however, has few good options to address its own economic spiral and fund eventual reconstruction amid a US blockade targeting its oil exports. Outreach to BRICS represents one of the few ways Iranian leaders can signal they are attempting to tackle this crisis as ordinary citizens face surging inflation.