De-Dollarization Beneficial to Iran Trade Relations

EghtesadOnline: After Iran, Russia and Turkey, three regional allies hit by US sanctions, discussed a possible replacement of the US dollar by national currencies last week, business figures in Iran are now weighing in on the degree the plan can be implemented with success.

News ID: ۷۴۶۰۱۰

16 September 2018

The discussion, which has been on the agenda of these countries, took place at the recent trilateral summit of the Syrian ceasefire guarantor states.

Iranian Central Bank Governor Abdolnasser Hemmati wrote in a message posted on Instagram on the issue that “we have decided to proceed with further work in light of the agreements reached at a meeting with the Russian Central Bank governor in Moscow.”

Russian Foreign Minister Sergey Lavrov previously described the US dollar as a lever of pressure, saying that Washington uses that when it “wants to punish someone”.

Earlier, according to Financial Tribune, Turkish President Recep Tayyip Erdogan called the Turkish lira’s recent tumble a “currency plot” and announced Ankara’s readiness to refuse the dollar in the country’s trade with partners.

“Good Catalyst”

In an interview with the news website of Iran Chamber of Commerce, Industries, Mines and Agriculture, Hadai Tizhoosh Taban, the president of Iran-Russia Chamber of Commerce, described the trilateral agreement as a “good catalyst” for the businesspeople of the three countries.

Taban referred to the Eurasian agreement involving Russia, Belarus, Kazakhstan and Kyrgyzstan, and said a currency agreement between Iran, Russia and Turkey can give Iran access to the Eurasian markets with lower tariffs.

Fatemeh Moqimi, a member of the Presiding Board of Iran-Russia Chamber of Commerce, believes that multilateral agreements can always benefit countries’ economies and likewise a currency deal for Iran, Russia and Turkey can be equally beneficial.

According to Moqimi, who is also the president of Iran-Georgia Chamber of Commerce, this can also be a good opportunity for Iran to demonstrate its ability to bring countries together and make a collective decision.

Asadollah Asgaroladi, the head of Iran-China Chamber of Commerce, however, said the economies of Iran, Russia and Turkey is tightly engaged with the US dollar but adds that this does not mean “de-dollarization cannot happen”.

“When governments decide to eliminate the dollar in trade transactions, they should respond to the question that how transactions would take place afterwards,” he said, adding that this ‘how’ is very important.

The veteran business figure said currently, a barter agreement is underway between the two countries and there is no problem, as long as there is no surplus but when that happens, “which currency should the difference be settled in?”

Jalal Ebrahimi, secretary-general of Iran-Turkey Chamber of Commerce, and Abdollah Mohajer Darabi, a Presiding Board member o f Iran-Russia Chamber of Commerce, are both of the view that if China is added to the triangle, a much more solid currency alliance can be formed.

Independent SWIFT

Ebrahimi proposed that governments established not just a joint bank, but an independent payment system like SWIFT that can make financial transactions between these countries possible.

EU powers are in talks over launching a payments channel that would enable European companies to trade with Iran as part of efforts to defy US sanctions and keep alive the nuclear deal with Tehran.

France, Germany and Britain are working with EU officials on the finance tool ahead of November’s restoration of a second wave of US sanctions that will target Iran’s oil exports and transactions with its central bank.

Maja Kocijancic, an EU spokesperson, told reporters on Friday that efforts were continuing to sustain cooperation with Iran in key economic sectors, including oil.

Part of the work was to ensure that companies doing legitimate business with and in Iran could still “have access to the necessary finance”, she was quoted as saying by Financial Times.

Another focus ahead of the November sanctions restoration is the SWIFT financial messaging system, which underpins many international transactions and is based in Belgium. The US has neither explicitly ruled out some kind of exemption for SWIFT, nor has it promised any special treatment.