Iran's proposal to eliminate dollar in mutual operations with Russia politicized: experts
Azerbaijan, Baku, Jan. 27 / Trend T.Konyayeva /
Iran's proposal to replace the U.S. dollar with the national currency [ruble and rial] in the implementation of trade operations and joint projects is a political decision and PR-move, without an economic feasibility study, experts say.
"This is a political statement without any economic content," Professor at Northeastern University Kamran Dadkhah wrote to Trend in an e-mail. "It is simply the kind of empty rhetoric that Iran's government is very good at".
Earlier, Iran offered Russia to use national currencies of the two countries in mutual calculations while implementing joint projects. According to Iran's Deputy Oil Minister Nogrekar Shirazi, the two countries can establish a joint bank that will finance projects. The parties must prepare a legal basis for launching the organizational work on this subject within four weeks.
According to Dadkhah, this decision is not reasonable from an economic point of view as confining payments to local currencies in trade operations would be equivalent to barter trade between Iran and the former Soviet Union.
"Confining the country to a local currency would be a throwback to prehistoric age and if it is implemented it would be to the detriment of the weaker trade partner, which in this case is Iran," he said.
As far as bilateral projects are concerned, Dadkhah believes that it will hamper the speedy settlement of accounts, but will not help to accelerate the implementation of major bilateral projects, as Nogrekar Shirazi mentioned.
American expert Paul Sullivan is also inclined to think that this is a political decision as the amounts that would be exchanged by Iran are tiny compared to the world market for currency exchange, which is about $3.5 trillion a day, and "its significance in the global financial community is nil".
"About 80 percent of all foreign exchange transactions happen in 10 banks in the EU and the US. Russia has less than 1 percent of the foreign exchange market. Iran is negligible," Sullivan, Professor of Economics at the U.S. National Defense University said on his own to Trend in an e-mail.
The opinions of American experts were supported by Vladimir Yevseyev, a leading analyst on Iran, who called Iran's proposal "PR-move", which is not well founded and is directed to demonstrate the United States their unwillingness to use dollar.
"The idea of calculation in national currencies is good for large turnover, Yevseyev, senior fellow at the Center for International Security at the Institute for World Economy and International Relations of Russian Academy of Sciences told Trend by telephone. - If huge sums of money are not involved, it needs to use the currency which is already being used in world practice."
He added that trade turnover between Iran and Russia is relatively small - just over $3 billion. "For such big states as Russia and Iran this is [the scale of economic cooperation] small," he said.
Among the reasons that the Iranian proposal is economically unreasonable, the experts mentioned the current lack of any large-scale joint Russian-Iranian projects, except the construction of the Bushehr reactor.
"As to fluctuations of the ruble and the rial exchange rate towards the U.S. dollar if a decision is made, it will not affect the national currencies of both countries, as Russia and Iran do not carry many trade operations," Dadkhah said. "Joint projects, including nuclear reactor in Bushehr or aviation projects, do not worth to mention them".
Yevseyev also supports such opinion, noting that "the only large-scale project is Bushehr, but it ends. All other projects are multilateral, and multilateral projects fail to use the ruble and rial."
Regarding the impact of such decisions on currency operations on global markets, experts also agreed that it will have no impact on the world community.
According to Dadkhah, realization of this decision has no effect on the global community, as Iran's trade and investment with Russia hardly exceeds a couple of billion dollars a year.
"The Ruble is tiny on the world currency markets and the Iranian currency is an almost nonexistent blip on the screens," Sullivan said on his own.
"Russia is trying to position the ruble as a regional currency, but yet it is only within the [newly created] Customs Union, said Yevseyev. And rial, even as a regional currency, is not walking." The Customs Union was established between Russia, Kazakhstan and Belarus on January 1.
E.Ostapenko contributed to the article.
Do you have any feedback? Contact our journalist at: [email protected]