Iran would do better to focus on developing its country rather than playing sophomoric currency games: U.S. expert
Azerbaijan, Baku, October 21 / Trend , T.Konyayeva /
Large-scale conversion of much of the dollar-denominated assets of Iran would further isolate the country, so the leadership of the state should deal with the development of the economy rather than enforcing its counterproductive policies, the U.S. expert Paul Sullivan said.
"Denominating more of Iran's assets in something other than dollars will simply work to isolate them even more, so the leadership of the state would do better to focus on developing their country rather than playing sophomoric currency games," Paul Sullivan, Professor of Economics at the U.S. National Defense University, told Trend via e-mail.
MEHR news agency reported that last week the Trade Development Organization of Iran announced that it plans to remove the U.S. dollar from its currency reserves. Furthermore, according to the report of the organization, Iran has recently appealed to Japan to hold mutual oil operations in yen instead of U.S. dollar.
The report of the Organization also states that since October 2007, Iran has been receiving 85 percent of oil revenues not in USD, but other currencies, and Tehran has decided to replace the dollar for the remaining 15 percent of oil revenues.
During the first period of his term, Iranian President Mahmoud Ahmadinejad issued a decree to replace the dollar with Euro.
Sullivan said that every country has the right to choose what currencies they will hold as reserves and what assets they will hold as support to those reserves.
"However, most financial and many commodity markets are global markets and they have no patience for, and give no value to, political financial games of this sort," the expert said.
He said that the world oil markets also like a certain degree of standardization, adding that Iran will be somewhat more isolated in that market as well.
In the big scheme of things such a move will have little effect on the dollar's value, Sullivan said. - Iran's entire economy is a very small part of the world economy.
"If they choose the wrong currency they could be losing quite a lot of value in variance and lost relative values in the future," the Professor said.
According to Sullivan, this also seems to be the wrong time to do this given that there seem to be some diplomatic headway between the US and Iran on certain issues.
Currenctly, talks between Iran and the West over the nuclear issue narrowed to the question of Iran's possible transfer of its low enriched uranium to Russia, which will turn the uranium into fuel for Iran's nuclear research reactor. President Barack Obama said that this arrangement is an improvement in relations between the U.S. and Iran and a major step towards building mutually beneficial relationships.
Conversion of the dollar in Iran also affects the work of brokers trading over oil futures on exchanges. "Will these be swapped into non-dollar denominations as well? The whole thing is silly politics and rather counterproductive economics and finance," said Sullivan.