The Central Bank of Iran reiterated its policy to reduce reliance on the US dollar in the domestic economy and trade with the outside world.
In a meeting in Tehran with Qais bin Mohammed Al Yousef, the visiting Omani minister of commerce, industry and investment Promotion, CBI boss Mohammad Reza Farzin highlighted reasons behind the long-pending policy, citing the abuse and weaponization of the greenback by successive US administrations for decades and Tehran’s decision to conduct trade in other currencies, especially Asian, the CBI website said.
The meeting was held during the Joint Iran-Oman Economic Commission headed by Farzin. Curtailing and removing dollar transactions from trade and economic exchanges between the two Persian Gulf neighbors was emphasized by Farzin.
"The groundwork has been created for conducting trade and economic deals based on Iran's national currency and the currencies of our partners, including Oman."
Farzin referred to last year's negotiations between Iran and Oman to promote monetary and banking relations as well as commercial ties and expressed Tehran’s readiness to use international mechanisms such as multilateral and bilateral monetary agreements to foster trade with the Sultanate of Oman.
Furthermore, he took stock of the growing Iran-Oman trade in the past year, which grew by 40% to $1.8 billion. "This volume of trade can certainly be conducted using the national currencies of the two nations through bilateral payment agreements."
Regarding the need to utilize joint bank card systems by the banking networks of the sides, the governor stated that Iran and Oman have signed an agreement to this end and its implementation is a mutual priority.
"The use of joint bank cards will reduce transaction costs and further pave the way for enhancing electronic payments along with bilateral trade."
De-dollarization in international trade and domestic economies transactions is gradually becoming a subject of universal importance for many countries, especially in Asia. With the increasing use of national currencies, countries want to effectively reduce their dependence on the dollar and by extension blunt the political risks associated with the American currency.
The Omani minister expressed Muscat’s interest in expanding economic and trade ties with Iran.
Mohammad Al Yousef highlighted the need and importance of strengthening bilateral financial and banking relations and suggested that creating an effective payment channel, a bilateral monetary agreement and using national currencies in trade can and will be useful.
"Certainly, using a payment channel, a bilateral monetary agreement and national currencies in trade is a constructive way to expand economic cooperation. Oman is ready to consider this prospect."
The senior Omani official emphasized the need to open bilateral credit lines and said the sultanate is willing and able to develop mechanisms and expand financial and banking relations with Iran to boost commercial and economic ties.
He commended Iran's industrial achievements and the success of the Tehran Expo, saying, "We are indeed impressed by Iran's industrial progress and are prepared to boost cooperation in the industrial sectors alongside financial and banking collaboration."
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.
Iran and China talked about increasing the share national currencies in two-way trade during President Ebrahim Raisi's visit to Beijing in March.
Russia and Iran 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.
