Iran’s decision to report foreign currency transactions in euro rather than the US dollar reflects the fact that the bulk of Iran’s foreign trade is with European and Asian countries and that it would be easier for the country, the head of Monetary and Banking Research Institute said.

Ali Divandari also told a press conference on Tuesday that Europe is among Iran’s important trade partners and plays a significant role in Iran’s economic interactions and that the Central Bank of Iran and MBRI have worked together to make the shift toward euro in a way that would serve the country’s economic interests.

“Most of Iran’s transactions in the post-sanctions era were with Asian and European banks, and as Iranian banks improve their adherence to international standards, more and more banks are willing to work with Iran,” Divandari was quoted as saying by MBRU’s website.

The government mandated on April 18 that all state bodies use euro instead of the US dollar for financial reporting, as the country seeks to reduce its reliance on the American currency.

However, the government on Monday eased the stricture and asked state bodies to conduct their official reporting in both euro and the dollar for two years and then shift entirely to the European currency, Tasnim News Agency reported

The new policy is expected to encourage government bodies and firms linked to the state to increase their use of the euro at the expense of the dollar.

Bank transactions involving the dollar are already difficult for Iran because legal risks dissuade major banks that are also active in the US financial system from doing business with Tehran. Foreign firms can be exposed to sanctions if they do Iranian deals in dollars, even if the operations involve non-US branches.

As a result, France will start offering euro-denominated credits to Iranian buyers of its goods later this year to keep its trade out of reach of US sanctions, the head of state-owned French investment bank Bpifrance said in February, Reuters reported.

  Market Concerns

Stressing that the issue of foreign exchange is of high concern for Economy Minister Masoud Karbasian, Divandari said the recent forex measures were decided after several meetings between decision-making bodies and was not an individual decision.

The rial slid sharply against the US dollar in the free market between last September and early April, sinking to a record low of about 60,000 against the dollar before authorities set a fixed rate of 42,000 and warned that using any other rate would tantamount to smuggling.

US President Donald Trump has threatened to exit the 2015 nuclear deal Iran reached with world powers unless it is revised. US sanctions will resume unless Trump issues new “waivers” to suspend them on May 12.

International leaders have called on Trump to uphold the agreement. On Sunday, French President Emmanuel Macron said there was no “Plan B” if Trump decided to pull out.

In an interview with US broadcaster CBS aired on Sunday, Iranian Foreign Minister Mohammad Javad Zarif said Iran could consider “resuming at much greater speed” their civilian nuclear activities if the US were to pull out.

Iranian President Hassan Rouhani on Tuesday reminded the US president that he will either uphold the deal or “face severe consequences”.

Source:

2018, Iran Switch to Euro Reflective of Trade, Wednesday, April 25, p.1,<https://financialtribune.com>