Russia's second-largest bank VTB VTBR.MM has opened a representative office in Iran, an Iranian official said Wednesday, as Moscow and Tehran try to react to Western sanctions.

The money-losing Russian lender is one of many key Russian banks now blocked from the SWIFT international financial messaging service.

Ties with Iran, also disconnected from SWIFT since 2018, have become ever more crucial for Russia since Moscow invaded Ukraine in February 2022.

The two countries have already connected their interbank communication and transfer systems, and Tehran has for months been planning to accept Russia's Mir payment cards, Moscow's alternative to Visa and Mastercard.

"The number of foreign banks' representative offices in recent years dropped from around 45 to 15, and VTB is the only bank to open its office during this period," semi-official news agency ILNA quoted Alireza Peymanpak, the head of Iran's Trade Promotion Organization, as saying. "Due to its active presence in the banking networks of Iran's export destinations such as CIS countries, India, Vietnam and particularly China, VTB will help to attract export earnings and reduce foreign transfer costs for Iran."

A source familiar with the Iranian banking market said VTB had already opened correspondent accounts with Iranian banks.

Meanwhile, Bank of Russia Governor Elvira Nabiullina may visit Iran in the coming weeks to strengthen financial ties, a separate source told Reuters.

Dominant lender Sberbank's SBER.MM CEO, German Gref, has also discussed reinforcing ties with the Islamic Republic, but has not yet entered the market, another source said, while fellow state-owned lender Promsvyazbank, which focuses primarily on the defense sector, is already present in Iran.

Reporting by Reuters