Iran's call for replacing dollar is more noise and propaganda than substance and policy: expert
Azerbaijan, Baku, October 23 / Trend , T.Konyayeva /
Iran is capable to solve the problem of using the U.S. currency as a payment tool for its international operations without replacing it with another currency, so Iran's call to replace the U.S. dollar is not reasonable, said the Professor at U.S. Northeastern University Kamran Dadkhah.
"Note that Iran can easily ask the buyers of oil to pay in another currency or convert its dollars into it. The fact of the matter is that Iran's call for replacing the dollar is more noise and propaganda than substance and policy," the Iranian expert who lives in the U.S. told Trend via e-mail.
Last week the Trade Development Organization of Iran announced that it plans to remove the U.S. dollar from its currency reserves. 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.
Such statements have two motives: economic and political, Dadkhah said.
From an economic point of view, getting most of its oil revenues in dollars, Iran loses, considering the depreciation of U.S. currency, the expert said. But, in addition, he said if Iran transfers its earnings to another currency and the dollar rises, Iran will lose.
From a political standpoint Iran's statements are a continuation of opposing the United States as 'the world arrogance" and pretending to stand up to it, Dadkhah said.
"The idea is that a symbol of the power of the United States is the fact that its currency is the international money, Dadkhah said. Therefore, Iran and Venezuela think that if they could strip the dollar of its position of being the international currency, they have dealt a blow to the American power."
Further, they have curtailed the US government's ability to run trade deficit for a long time, the expert said.
"Such calls get louder when, as has been the case recently, the dollar is depreciating," Dadkhah said.
In early October, British newspaper The Independent reported with reference to banking sources in the Persian Gulf and Hong Kong that a group of countries that are amongst the largest producers and consumers of oil (including Iran, Venezuela and Russia) plan to withdraw from accounts with the USD in the implementation of the oil transactions and use other basket of currencies.
"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, U.S. expert Paul Sullivan said. 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."
He also added that replacing most of the Iranian assets [in U.S. dollars] to any other currency, as well as the desire of the world oil markets to achieve a certain degree of standardization isolate Iran even further.
According to Dadkhah, the fact of the matter is that whether the dollar is solid or not, there is no substitute for it. That is why still more than 60% of international reserves are held in the dollar, he said.
A sensible policy would be to receive the dollars but keep the reserves in different currencies in proportions to the needs of the economy to import from different areas of the world, said the expert.
"There is no question that after the recent crisis, the huge US budget deficit, and the emergence of China as a world economic power, there is a need to rethink the international monetary system, Dadkhah said. - But small players on international scene such as Iran and Venezuela cannot do more that make noise."