Tehran, Iran, Nov. 10
By Mehdi Sepahvand – Trend:
This October, Iran and Turkey’s central banks signed an agreement to swap their national currencies in a bid to help bilateral trade. The move has had precedents, Iran having earlier made agreements with Russia and Iraq. But this is the easy way to do business only if your country is under a US dollar boycott.
Iran pushed hard to rid itself of international sanctions in the years 2013-2015 in a tense series of talks with world powers called the 5+1 (the US, UK, France, Russia, China, and Germany), which culminated in the Joint Comprehensive Plan of Action (JCPOA). The deal lifted international sanctions, but failed to do so regarding a primary US restriction on the dollar for Iran.
An attempt to use the euro by the Iranian government have proven insufficient because the currency cannot be found favorable anywhere around the globe.
As a result, the Iranian government has been trying to reach bilateral agreements with other countries to use national currencies in order to avoid the USD. However, doing so does not come by easily. It is the best choice only after the USD, which is the lingua franca of the global market.
Iran’s initial agreements with Russia to use the ruble failed to perform after the Russian currency faced great depreciation following the political aftermath of the Crimean issue that set Russia against Europe.
In January 2017, the members of the Iranian Parliament removed a clause from the 6th Development Plan (2017-2022) that would urge commit the government to a minimum of 10 percent of foreign trade in local currencies. Nader Qazipour, the only lawmaker that spoke against the clause, is known for radical conservativeness and whimsical statements. He said the clause does not guarantee the interests of tradesmen against a possible drop in the currency rate of a second country with which Iran would start a currency swap.
An ever-present depreciation of the Iranian rial against foreign currencies poses a permanent threat to any attempt by the government to consider and implement currency swap deals.
Since 2006, some international organizations, such as the Financial Action Task Force, introduced smart restrictions for Iran. This resulted in a 2010 boycott on the Central Bank of Iran (CBI). As a result, the CBI kicked off a currency auction and set for reducing the amount of physical money. Then ensued mounting demand for currency as well as black market, bringing with it an unprecedented fall in the national currency rate. The rial jumped from 10,260 per USD to 18,000, then to 26,000 and above. At present, the USD is worth more than 40,000 rials.
World experience shows that money swap deals would not persist unless multilateral agreements and organizations are created to support them, so that the currencies could be liquidated among the many members which share economic and geographical commonalities. Iran would have a tough job convincing a multiplicity of countries to enter a currency alliance, none of which would be under such sanctions as Iran is.