The Central Bank of Iran is planning to hold an event in Tehran to discuss international monetary relations and de-dollarization, the CBI deputy for international affairs, Mohsen Karimi, said.
"The central bank seeks to curb reliance on the US dollar and create effective monetary transactions and currency swap contracts with other countries," Karimi was quoted as saying by the CBI website.
Elaborating on CBI strategy for expanding bilateral currency exchanges and reducing dependence on the greenback, he said, "Talks are underway with several countries over ditching the USD in bilateral trade…We have made considerable progress in some cases." He did not elaborate nor name the countries.
He recalled the tremendous benefit that the United States has enjoyed as a result of the dollar's international reserve currency status, and the political misuse of it against other countries.
"Independent countries are distancing themselves from the dollar and seeking to de-dollarize their economies to reduce the risk of US sanctions," Karimi concurred.
"The world monetary and banking system has been dollar-centric for the past 7-8 decades, and important markets, especially the energy market, have been based on that currency. However, the use of other currencies or local currencies carries its own risks and uncertainty that central banks need to anticipate and hedge against.”
He emphasized that monetary contracts have no fixed conditions and differ subject to the economic and monetary conditions of countries. "As a country that has been subjected to oppressive sanctions for years, we must engage in bilateral currency exchanges to avoid [further] economic damage," he said.
China, Russia on Track
Iran's move toward de-dollarization is not unprecedented. Other countries such as Russia and China have taken similar measures and the trend is gaining momentum globally.
Iran and China talked about increasing the share national currencies in two-way trade during President Ebrahim Raisi's recent visit to Beijing.
Iran and Russia have already started trading in national currencies. The share of such settlements exceeded 60% in 2021, according to Russian officials.
In late January, the two central banks signed a deal to connect their national interbank communication and transfer systems to help boost trade and ease bank transactions.
Per the deal, 52 branches of Iranian banks and four unnamed foreign banks will use Iran's local interbank telecom system, known as SEPAM, to connect with 106 banks using Russia's System for Transfer of Financial Messages or SPFS.
Iran's Bank Shahr and Russia's VTB Bank will be involved in the pilot program and other lenders will join gradually. The agreement was signed by Karimi and Vladislav Gridchin, on behalf of Russia’s central bank.
SPFS is the Russian equivalent of the SWIFT financial transfer system developed by Russia’s central bank. It is in place since 2014 when the US government first threatened to disconnect Russia from SWIFT.
SEPAM (a Persian acronym) currently functions as a venue through which interbank transactions are conducted electronically. It is reportedly capable of being connected to foreign banks.
