Former governor of the Central Bank of Iran, Ebrahim Sheibani, has urged government officials to switch to transactions in national currencies by signing currency swap agreements with other nations.
Sheibani, who is the chairman of the Economic Committee at the Strategic Council on Foreign Relations, told ISNA on Saturday the country’s belated recognition of the importance of bilateral currency swap deals with other nations should be expedited, emphasizing that currency swap agreements are strongly advocated by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.
“Currency swap deals are emerging very rapidly among nations and this enables them to avoid the trap of western-dominated currencies,” Sheibani said. “Iran should have availed itself of this opening long before in the midst of western sanctions over its nuclear program.”
Local currency trade can end the nation’s dependence on US dollar for commodity exchange and eliminate trade barriers were imposed on Iran by the United States and United Nations.
In January, Iran’s central bank said it had suspended the use of US dollar in foreign transactions and was working on bilateral currency swap deals. This was followed by Moscow and Tehran’s announcement that they were going to set up a joint bank account for transactions in national currencies, such as in food trade.
Sheibani complained also about Iran’s foray into currency swap deals and said, “Other countries that did not even face our problems benefited from these agreements and thereby freed themselves from the tentacles of the dollar. Since foreign currencies are expected to gain against the rial in future, we ought to increase our leverage when it comes to money transactions.”
The official pointed to the recent move by CBI to sign agreements with Turkey, Russia and Iraq, saying the bank should aim to establish similar agreements with other nations.
Earlier this year, Iran and Turkey announced plans to switch to transactions in national currencies.
Turkish President Recep Tayyip Erdogan said after he met with President Hassan Rouhani in April that they “do not wish to remain under the pressure of the dollar or the euro, or under the influence of their exchange rates.”
He added, “We have agreed that Turkish and Iranian national currencies are to be used between us. This will add extra strength to our countries.”
Erdogan also said that Turkey and Iran intended to increase bilateral trade to $30 billion.
A similar agreement has also been signed with Iraq, but has yet to be implemented.
Caveat
Sheibani, however, cautioned that currency swap deals should be used only in “mutual export-import transactions,” saying that if the agreement is used only to export Iranian oil, then it would no longer be worthwhile.
Sheibani, who presided over the central bank from 2003 to 2007, said during his tenure they had entered into trade agreements with a handful of Asian countries, in which local currencies were used to settle accounts.
Currency swap deals have also been introduced in the country’s sixth development plan as a major economic policy. The plan envisions Iran becoming a trade hub with strong ties to regional and Southeast Asian countries.
While several officials, including Vice President Es’haq Jahangiri, have hailed the virtues of currency swap deals, they have their own detractors, too.
In an interview with ISNA, Chairman of the Imports Committee at Iran’s Chamber of Commerce Majidreza Hariri said currency swap agreements with Turkey, Russia and Iraq are currently not in the interest of Iran, since exports to these countries far exceed imports.
“It’s the norm for countries with a balance of trade to switch to local currencies. Therefore, if the surplus of export revenues is not readily convertible into major currencies of the world, then this would ultimately hurt us,” Hariri maintained.
Hariri contended that even turning to euro instead of the US dollar could be risky since the European currency could lose its value against the dollar and incur losses for Iran.
“For the time being, we better stick with the greenback since it has proved to be the safest currency so far,” he said, adding that such agreements should seek to promote Iran’s non-oil exports.
