Local Currencies to Ease Iran-China Transactions

EghtesadOnline: Governor of the Central Bank of Iran Valiollah Seif said the prospect of Iran and China using local currencies in bilateral trade will eliminate any difficulties arising from the fallout of the US decision to quit the nuclear deal Iran signed with world powers in 2015.

News ID: ۷۴۵۴۲۸

10 June 2018

"Currently, the country's banking system is facing restrictions due to the effects of the sanctions, for which we hope  proper solutions will be found by the country's senior political officials during President Hassan Rouhani's visit to China," Seif told IRNA.

President Rouhani left Iran for China on Friday where he is scheduled to take part in the 18th summit of Shanghai Cooperation Organization.

Jointly led by Russia and China, SCO was launched in 2001 to address regional security, political and economic challenges. The eight-member group also includes Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan and, since last year, Pakistan and India, according to Financial Tribune.

Iran is an observer member seeking full membership.

Noting that 25% of Iran's oil exports go to China, Seif said the country has been one of the most important trade partners and as a major customer of Iranian oil, it has a significant place in Iran's strategic policies.

According to data released by the Islamic Republic of Iran Customs Administration, China, along with the UAE, Iraq and South Korea, was among the top export destination of Iran.

US President Donald Trump pulled out of the international nuclear deal with Iran—known as the Joint Comprehensive Plan of Action—on May 8 and said he would reimpose sanctions within 180 days, prompting several European companies to announce they would end business with Tehran before the Nov. 4 deadline.

Since then, banks, insurers, shipping companies and European oil refiners have been gradually severing ties with Iran, complicating the efforts of European and other countries to keep the nuclear deal alive.

European powers have been scrambling to salvage the agreement. Foreign and finance ministers from  the three European countries—France, Britain and Germany—have written to US officials to stress their commitment to upholding the pact and to urge Washington to spare EU firms active in Iran from secondary sanctions.

China’s adeptness at doing business with Iran through state-owned companies not exposed to the American financial systems could make Beijing the big beneficiary Trump’s move to withdraw from JCPOA.

Maintaining Relations

Seif noted that despite immense pressures and continued sanctions in the post-JCPOA era, Chinese banks and companies have had very good cooperation with their Iranian counterparts and the two sides have signed many contracts.

"China has voiced its opposition about the imposition of multilateral sanctions [on Iran] and because of this stance, Iran and China will maintain their economic and trade ties and [even] expand them," he said.

Referring to support from China Export and Credit Insurance Corporation known as Sinosure and Iran's partnership with China in the "One Belt One Road" initiative, Seif said they were indicative of the long-term strength of cooperation between the two countries.

Last year, China signed an agreement with Iran to provide a credit line of $10 billion for its infrastructure projects–in what was seen as the biggest economic deal between the two countries after the removal of sanctions against the Islamic Republic in 2016.

The agreement was signed between China’s CITIC Group Corporation and a consortium of Iranian banks that included Bank of Industry and Mine, Refah Bank, Parsian Bank, Bank Pasargad and Export Development Bank of Iran.

All the financing was fully backed by Sinosure, which is a major Chinese state-owned enterprise under the administration of the state-owned Assets Supervision and Administration Commission of the State Council that provides export credit insurance, particularly coverage for the export of high-value added goods in China.

The "One Belt One Road" initiative promotes a vision of expanding links among Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment.

China's Finance Minister Xiao Jie has in the past underscored Iran's strategic role in China's New Silk Road plan, noting that Iran can be a party for fulfilling this vision.