De-dollarization of the economy and trade is feasible, as Asian and regional countries could conduct their foreign exchange transactions within a limited framework using their own national currencies, an economic expert said.
In an interview with IBENA, Davood Souri, however, reminded that the price of goods and the value of currencies in trade transactions are always measured in terms of the US dollar.
Members of the Asian Clearing Union (ACU) – a nine-member group of central banks, including those of India, Pakistan and Iran – are to launch a new cross-border financial messaging system in the coming weeks, as an alternative to the main international network, SWIFT (Society for Worldwide Interbank Financial Telecommunications).
Emphasizing that de-dollarization does not mean completely eliminating the dollar from the foreign exchange process, Souri said, "It may be possible for some countries to help meet some of their commercial needs without the need for dollars and by using their own national currencies within a specific framework."
The economic expert referred to the establishment of a messaging network as a substitute for SWIFT by member countries of the Asian Clearing Union and said the value of any network lies in its subscribers: the more subscribers a network has, the greater and wider its value and use.
"Therefore, if our country intends to limit a part of its transactions with compatible countries in the region and the union, it can be said that in this framework, there is no need for SWIFT. However, this depends on the expansion of the new network and how gradually it can add new members and banks to its network. We should wait for the launch and efficiency of this network to make a more accurate assessment of the value of this action," he said.
The Central Bank of Iran in May said it has developed a special messaging system for banking communication among member states of the Asian Clearing Union.
Recently, Mohsen Karimi, CBI’s deputy for international affairs, said that the subject was brought up at last year's ACU summit and was reviewed in special commissions.
“The union members called for replacing the SWIFT system and the implementation of the new system as a replacement for SWIFT is likely to start next month among the union members,” he said.
“This messenger will be exclusively for communication among member states, covering 100% of their needs and replacing SWIFT, thereby reducing transaction costs among members.”
Earlier, Mohammad Reza Farzin, the CBI governor, had said the completion of ACUMER, ICU's interbank messaging system, practical measures to diversify the union's currency basket, the prospect of trade among members using central bank digital currencies, establishment of subcommittees, linking card payment systems among members and training programs to share knowhow are key items on the union's agenda.
ACU was established in December 1974 at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific whose members include Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, Pakistan, Sri Lanka and Iran.
Commenting on the presence of the second largest Russian bank in Iran, the expert said, "Any move in this field could be considered positive and constructive. If this bank cannot solve any problem, it will certainly not create new problems. But in reality, everything depends on how much the second largest Russian bank is influenced by Western and US international sanctions, and how much ability and willingness it has to facilitate currency and banking transactions with us."
Souri noted that if the Russian bank can help achieve financial goals, it will be a great help to the country's banking system.
“The start of this movement is a positive step, but for evaluation, we must wait and see the official activation of this bank in Iran," he said.
In mid-May, it was reported that Russia’s second largest bank VTB had opened a branch in Tehran, becoming the first Russian bank to do so. In return, Iranian officials have said two of their country’s banks are planning to open branches or offices in Russia.
