The notion of eliminating the world’s dominant reserve currencies such as the dollar and euro from trades and transactions between Iran and Russia has been proposed repeatedly by both countries in recent years.
Many believe that without the dollar, Iran would be able to bypass western sanctions imposed over the country’s nuclear energy program, while some consider the policy as a barrier to globalization process.
The idea was initially introduced by the Iranian government in 2012, after the European Union in a series of sanctions, disconnected Iran’s banks from the swift banking network—the world’s hub of electronic financial transactions—to cut the country’s access to oil revenues.
In May 2014, member of the Parliament’s Budget and Planning Commission, Musa-al-Reza Servati, announced the drafting of a plan on future monetary agreements with Russia and other trade partners, such as China and India based on which the dollar and euro would no longer be used in trade with those countries.
Nonetheless, a proposal for ruble-rial trade was later suspended by Iran, on the grounds that following the imposition of sanctions on Russia by the United States over the crisis in Ukraine, ruble was losing value.
But in April, Mohammad Hossein Barkhordar, head of the High Council of Imports at Iran’s Chamber of Commerce, Industries, Mines and Agriculture, told ISNA that bypassing the US dollar and euro in Iran-Russia trade could take effect in the current Iranian year (started March 21), if the ruble’s value stabilizes.
Arguments
According to Barkhordar, it is important for such agreements to be sustained; they must not be viewed as temporary relief measures that are in times of sanctions.
“Although no sanctions have been imposed on China, the country has adopted the policy in trade with many countries.”
Reliance on the dollar and euro in trade could have been reduced significantly if the use of domestic currencies had been adopted when western sanctions were first imposed on Iran, he said.
Fatemeh Moqimi, a member of Iran-Russia Chamber of Commerce, however, believes that ditching the dollar could result in a slowdown in Iran’s economic interaction with the world.
Iran and world powers are currently in talks to resolve a 12-year dispute over Iran’s nuclear program by a June 30 deadline. The government hopes that the removal of sanctions following a nuclear deal will boost international trade.
Moqimi believes moving toward international trade requires adapting international currencies.
Referring to the undeniable role that the dollar plays in international trade, she says, “When it comes to currencies, uniformity is a necessity in global trade; Russia and Iran should not be exceptions.”
