Iran doesn’t leave attempts to get rid of the financial hegemony of the US dollar and is still seeking ways for transition to clearing accounts in national currencies with its close and friendly trade partners.
The burden of hard financial sanctions,
when transactions in dollars have become impossible due to disconnection
from the SWIFT payment system, is still well remembered as it caused a
massive damage to Iran’s economy.
If taking into account that oil revenues
constitute the backbone of the Iranian economy, and that oil prices are
tightly linked with the dollar, it becomes clear how volumes of the
country’s oil exports literally collapsed, and how Iran lost its strong
position in the world’s oil market. So far, the country’s economy still
continues to recover from the effect caused by sanctions.
The threat of new sanctions is still high
enough. Therefore, Iran’s leadership is looking for alternate ways that
would allow the country’s financial system to avoid, albeit not
completely, dependence on the dollar.
Iran sees a solution to withstand possible
future challenges in concluding bilateral currency swap agreements with
some of its trade partners.
In the past, Iran had this kind of experience in its trade with India, when it took payment for oil in Indian rupees.
In mid-October, Iran and Turkey announced
that the final agreement for a currency swap to facilitate trade and to
boost direct investments had been signed.
According to the agreement, the central
banks of Turkey and Iran have allocated a credit of 5 billion lira ($1.4
billion) and its equivalent in rials to their respective agent banks,
to be used as letters of credit with a repayment period of one year for
both countries’ traders, the Central Bank of Iran’s official website
Iran and Russia are also working for the
integration of both countries’ payment systems. The first stage of the
process will be implemented in the next three months, the Iranian
Financial Tribune reported in late October.
It has been agreed that in the first stage,
Iranian citizens, who have a Shetab (Iran’s national payment system)
card and Russians who own Mir Business Bank cards would be able to use
ATMs of both countries, the CEO of Informatics Services Corporation
(ISC) of Iran Abu-Taleb Najafi said.
He noted that the next phase of the plan
would be to integrate Iran’s payment system with international networks.
Earlier in October, ISC signed a deal with Russia’s BPC Company to
develop a national platform to link international card payment systems
with the Iranian system.
Najafi elaborated that the process of
establishing infrastructures for integration with international payment
systems would take at least 10-12 months. "We need to wait and see how
negotiations between CBI and foreign payment companies like China’s UPA
and Japan’s JCB conclude,” he said.
Early this month Iran and Pakistan signed a
currency swap agreement to enhance bilateral trade, said Mehdi
Honardoust, ambassador of Islamic Republic of Iran to Pakistan.
This agreement will open up channels in the
central banks of both countries for trade transactions to reduce the
use of dollar accounts for Letter of Credit (LC) clearance.
The arrangement is being carried out in
addition to setting up a banking channel between the two countries by
the two central banks.
So, applying the currency swap instrument
enables Iran to channel trade-related international payments with a
number of its key partners, particularly regarding the sale of oil
without the US dollar.
There may be some disadvantages due to the
high inflation rate in the first place, instability of macroeconomic
environment, relatively limited liquidity of the currency market and
limited geography of foreign trade operations.
In any case, it has yet to be learnt how
smoothly the mechanism of bilateral currency swap works in Iran’s
economic environment in the long term.
Source: Iran Daily
This article originally appeared on trend.az.