The ban imposed by the Industries Ministry on import orders based on US currency seems to be a win for the European currency.

Announced last week, the ban blocks imports priced in the US dollar for Iranian traders and is in line with the recent policy of the government and the Central Bank of Iran for sidelining the dollar.

According to Reza Boostani, an economist, the measure will pave the way for the Iranian foreign exchange market to have more transactions in euro.

“The use of dollar [in trade] is no longer easily done due to international restrictions and this increases the cost of transactions,” Boostani was quoted as saying by Tehran Chamber of Commerce’s website.

The economist noted that when transactions were settled in dollar, depending on whether the government was involved or which bank made the transaction, different levels of limitations occurred.

Boostani said the norm is for the central bank to use oil revenues for imports, but now that Iranian oil is mostly sold in euro and South Korean won, the old pattern is no longer feasible.

“When import orders are based on US currency, the central bank has to allocate dollar but when they are done in euro, the bank will have to provide euro,” he said.

After signing the nuclear deal in 2015 and experiencing continued restrictions, Iran responded with a slew of measures to counter dollar restrictions, including by clinching agreements with several nations to use national currencies.

In October, the central banks of Turkey and Iran allocated a credit of 5 billion lira ($1.4 billion) and its equivalent in rial to their respective agent banks to be used as letters of credit with a repayment period of one year for both countries’ traders.

According to CBI’s head of Exports Department, Samad Karimi, Iran currently has a total of 10 memoranda of understanding and protocols pertaining to monetary agreements with other countries.

Because of US primary sanctions, international banks can engage in US dollar-denominated transactions involving Iran or Iranian parties as long as those transactions do not pass through the United States or otherwise involve a US citizen.

According to data by the Islamic Republic of Iran Customs Administration, in the fiscal 2016-17, out of the $42.7 billion of imports, more than 60% came from China, India, the EU and the UK. The share of imports from the US accounted for a mere 1% during this period.

Iran had indicated in the past that it intends to conduct most of its foreign exchange transactions in euro.

Source:

2018, Iran Currency Market Gearing Toward Euro, Tuesday, March 6, p.1,<https://financialtribune.com>