Iran, Russia Stop Bilateral Payments in US Dollars

Russia and Iran have launched an oil-for-goods exchange program seeking to eliminate bilateral payments in US dollars and plan to keep it going for five years, the Russian energy minister said.Alexander Novak added that the first Iranian cargo of crude oil had been received by Russia, RT reported.

The idea about ditching the greenback from bilateral trade was first pitched in 2014 when Iran was still under sanctions. Even after the deal was reached, the two countries decided to go ahead and the preliminary agreement was reached last year.

Based on the agreement, Russia will receive 100,000 bpd of Iranian crude in exchange for $45 billion worth of Russian goods.

Iran has been actively looking for ways to drop the dollar as an international trade currency because of the lingering US sanctions and because of the possibility that more may be on the horizon. Earlier this month, Tehran announced it will publish all its official financial reports in euro instead of the US dollar to encourage a switch to euros among state economic agencies. In March, Iran banned purchase orders denominated in US dollars and said any merchant using dollars in their orders will not be allowed to conduct import.

A senior central bank official at the time explained that as the use of the dollar is banned for Iran and traders are literally using alternative currencies in their transactions, there is no longer any reason to proceed with invoices that use the dollar as the base rate.

The official added that for a long time, Iran’s banking sector cannot use the dollar as a result of the sanctions.

Russia is also willing to reduce its dependence on the US currency for similar reasons: sanctions and lack of access to western financial markets. Iran is a natural partner, a sanction buddy of Moscow—their partnership will only deepen if the US reimposes sanctions on Tehran.