Iran, Turkey Finalize Nat’l Currency Swap Agreement

EghtesadOnline: Following several rounds of negotiations between Iranian and Turkish officials, governors of the two countries’ central banks announced on Thursday that the final agreement for conducting bilateral trade in local currencies has been signed.

News ID: ۷۷۹۸۲۶

23 October 2017

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 rial 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 reported.

A few weeks ago, as part of a mission to Ankara headed by CBI Governor Valiollah Seif, the central banks of Iran and Turkey signed a draft of the rial-lira currency swap agreement with the goal of preparing the grounds for expanding economic and trade ties.

The finalized version was signed after a meeting between Iran's First Vice President Es'haq Jahangiri and Turkish Prime Minister Binali Yıldırım in Ankara on Thursday, Financial Tribune reported.

The Iranian delegation's trip to Turkey was a follow-up for the Turkish President Recep Tayyip Erdogan’s visit to Tehran, which also pursued the goal of expanding bilateral banking ties and increasing bilateral trade.

The CBI chief and his Turkish counterpart Murat Çetinkaya announced that the agreement seeks to "facilitate trade using the national currencies of both countries to finance trade and boost direct investment".

The agreement will considerably reduce the costs for both countries’ traders, as they will no longer need to use intermediate currencies since the specified agent banks are allowed to finance bilateral trading via international payment tools such as letters of credit and remittances in their local currency.

According to CBI’s report, Bank Melli Iran and Turkey’s Ziraat Bank have been determined as agent banks to manage the allocated funds and issue letters of credit.

This is while during Jahangiri’s meeting with Turkish prime minister, the issue of connecting the two countries’ bank cards was also discussed and it was determined that the IT department of both countries’ central banks should hold a meeting within two weeks to assess the required technical infrastructures.

Upon the successful implementation of the project, Iranian and Turkish citizens can easily benefit from mutual electronic banking services.

The Iranian first vice president called for implementing the mutual agreements, for which Iran and Turkey should resolve their issues as fast as possible to expand cooperation in various sectors.

“Boosting ties in different fields, especially banking, customs and energy, is of common interest for both sides,” Jahangiri said, as he declared that Iran is ready to tighten cooperation with Turkey in both regional and international matters.

He also pointed to the recent meeting between Erdoğan and Iranian President Hassan Rouhani in Tehran during which they determined that the volume of trade between the two countries should reach $30 billion, a goal that can be reached only if both countries manage to use all potentials and resolve issues impeding the expansion of economic ties.

Open Borders

Iran and Turkey are going to hold joint commission meetings in the foreseeable future, in which preferential tariffs will be discussed as they plan to conduct free trade between the two countries, Jahangiri’s official website reported him as saying.

The Iranian first vice president also noted that after negotiations between high-ranking delegations of both countries, it was agreed to keep borders open 24 hours a day to facilitate bilateral trade.

This is while the Turkish prime minister also believes that economic ties between Iran and Turkey will increase through both sides’ efforts.

“The volume of bilateral trade between Iran and Turkey currently stands at around $12 billion and if the goal is to increase this figure to $30 billion, we need to take effective steps to make it happen,” Binali Yıldırım added.

Technology, Environment Agreements

Two other agreements were also signed in the presence of Jahangiri and Yıldırım.

The first agreement was between the Iranian Center of International Scientific Cooperation affiliated with the Ministry of Science, Research and Technology and the Scientific and Technological Research Council of Turkey to expand scientific and technological research ties while the other pertained to environmental cooperation between the two countries.

Iran's Minister of Roads and Urban Development Abbas Akhoundi also accompanied the Iranian delegation and met with Turkish Minister of Transport, Maritime Affairs and Communications Ahmet Arsalan to discuss bilateral issues.

The most important topics of discussion were the transit route of Turkey to Qatar, which passes through Iran, damages sustained by Iranian drivers in Turkey and establishing an expert Iran-Turkey road transportation committee.