The Majlis Research Center, the influential research arm of the parliament, has stressed the need to start currency swap deals with the main trading partners to help keep the economy immune against hostile US sanctions.
"Transferring money is a key challenge for manufactures wanting to import raw material. Currency swap between central banks outside the purview of SWIFT could be a solution for skirting the sanctions," the MRC said.
It estimates that deals with China, the UAE, Turkey, South Korea, India, Japan and Italy could help protect at least half of Iran’s total foreign trade against sanctions.
"Given the importance of political relations, China, India and Turkey could be the priority nations," the report said.
Iran's non-oil foreign trade during the five months (April-August 2019) of the current fiscal year stood at $35.5 billion, which indicates 7% decline compared to the same period last year.
The Central Bank of Iran has been contemplating such agreements to limit the role of the US dollar in its currency basket. The plan to promote currency swap deals is enshrined in the Sixth Five-Year Economic Development Plan (2016-21) that obliges the CBI to create the groundwork for signing bilateral or multilateral currency swap agreements.
Talks have been held with Russia, China, Pakistan and India.
Back in 2017, Iran and Turkey signed an agreement for conducting bilateral trade in local currencies.
Put on Hold
According to the deal, the central banks of Turkey and Iran allocated credits to the tune of 5 billion lira ($1.4 billion) and its equivalent in rials to their respective agent banks to be used as letters of credit with a one-year repayment period.
"The agreement has been put on hold for now, mainly because it was based on the SWIFT network," the MRC revealed.
Iran’s trade with Turkey totaled $4.21 billion during the first seven months of 2019 – down 30.2% compared to the corresponding period in 2018.
Last November, SWIFT (Society for Worldwide Interbank Financial Communications), the financial messaging service based in Belgium said it would suspend access for Iranian banks, including the Central Bank of Iran.
That decision came after the US re-imposed tough financial and other economic sanctions against Iran last year after President Donald Trump abandoned the 2015 nuclear agreement between Iran and the six world powers in 2015.
Currency swaps are relatively a new method in the history of business transactions according to which transactions are undertaken using local currencies based on mutual agreement.
In other words, instead of using medium currencies such as greenback or euro, the currencies of source and destination countries are used.
