0300 GMT July 21, 2018
The deal, which has been confirmed by the Russian media and Iran governmental authorities, needs to bypass the world's reserve currency entirely due to the restrictions on trade in US dollars in Iranian banks, breakingenergy.com reported.
The deal has been under discussion since 2014 when Iran was still under Western sanctions over its nuclear program.
At the time, the Obama administration said this deal raises 'serious concerns' and would not be consistent with the nuclear talks between world powers and Iran. Last year after the sanctions were lifted, the deal was deemed no longer necessary by the Russian Energy Minister Alexander Novak.
However, in March of this year, Novak said the deal was back on the table with Russia buying 100,000 barrels of oil per day from Iran and selling the Iranians goods worth $45 billion.
While most of the Western sanctions on Iran were lifted in January 2016, the country still faces significant challenges with trade, due to the remaining sanctions preventing banks from conducting transactions in US dollars.
In February, a report by the International Monetary Fund said that while Iran had been reconnected to SWIFT, significant challenges prevent Iranian banks from fully-reconnecting to global banks still exist mostly due to remaining US sanctions.
The biggest obstacle to Iran reintegrating into the global financial system is the remaining US sanctions.
They prohibit US financial institutions and companies from dealing with either Iranian companies or the Iranian government.
According to the IMF: "US dollar clearing restrictions have not been lifted and pose a significant challenge for non-US banks who may do business with Iran, but may not be paid in US dollars."
To bypass these restrictions, Russia will reportedly pay for the Iranian oil with half cash and the other half in goods.